Bitcoin’s recent break from its usual trading pattern against U.S. technology shares is a warning sign of an approaching credit shock, according to Arthur Hayes, CIO at Maelstrom and co-founder and former CEO of BitMEX.
Hayes argues that Bitcoin acts as an early-warning system for changes in fiat liquidity and is now signaling stress ahead for the U.S. banking system and the broader economy.
Bitcoin as a gauge of fiat liquidity
In his analysis, Hayes describes Bitcoin as the most responsive freely traded asset to the supply of fiat credit. When Bitcoin and the Nasdaq 100 index, often treated by investors as correlated risk assets, start to diverge, he says that gap can signal looming “credit destruction,” particularly in dollar-denominated debt.
He outlines a familiar crisis sequence: markets first reprice debt held on bank balance sheets, the weakest and most leveraged institutions slide towards insolvency, and only then do central banks react with aggressive monetary easing. The resulting surge in fiat creation has previously lifted Bitcoin off its lows and set the stage for new record highs, he says.
Hayes points to the 2008 global financial crisis as the clearest example this century of such a deflationary shock, when stresses that began in U.S. subprime mortgages eventually toppled parts of the banking system after years of rising leverage and offshoring of manufacturing.
From factory floors to office desks
This time, he argues, the pressure point has shifted from blue-collar workers to white-collar “knowledge workers”, as rapid advances in artificial intelligence are seen as threatening a large share of higher-paid office roles, with far-reaching effects for consumer credit, mortgages, and bank balance sheets.
Hayes sets out what he calls the official optimism around AI, that creative destruction will eventually deliver higher productivity and growth, against a more immediate risk.
Before any long-term gains materialize, he says, many high-earning but heavily indebted workers could lose their jobs, making it harder for them to keep up with loan payments and raising the losses banks are likely to face on those loans.
A stress test for U.S. banks
To illustrate the potential scale, Hayes builds a simple model around U.S. knowledge workers. Citing labor and credit figures, he says there are just over 72 million such workers within a labor force of about 164 million, noting they tend to earn more than the average American, support a consumption-led economy, and carry above-average levels of unsecured credit and mortgage debt.
He focuses on roughly $3.76 trillion of consumer credit likely held by banks once government-backed student loans are excluded and assumes that many knowledge workers also hold mortgages, with an estimated average balance of about $250,000.
The stress scenario assumes 20% of knowledge workers lose their jobs as companies automate tasks with AI systems. Given the flexibility of the U.S. labor market and relatively low firing costs, Hayes argues that profit-driven firms would move quickly to cut headcount if AI tools can perform work significantly faster and cheaper than humans.
Financial markets would then price in higher defaults on consumer and mortgage loans, while surviving banks, unsure of former high earners’ future income prospects, would restrict new lending. The resulting contraction in credit would weigh on demand for goods and services and could push the economy into a deeper downturn, he says.
Two paths for Bitcoin in an AI shock
For digital assets, Hayes outlines two main paths. In one, Bitcoin has already absorbed most of the downside, while equities have yet to fully reflect the weaker credit outlook. In the other, both Bitcoin and stocks fall further as the crisis accelerates, before central banks respond with large-scale liquidity support.
In both cases, he expects an eventual monetary response marked by renewed “money printing” to stabilize the financial system, which he views as ultimately supportive for Bitcoin and other risk assets.
Until there is a clear signal from the Federal Reserve that it is prepared to ease aggressively, Hayes says investors should keep leverage low and be cautious about chasing rallies in either crypto or stocks.
