Former BitMEX CEO Arthur Hayes believes that if the AI investment frenzy eventually bursts, it could become a significant bullish catalyst for Bitcoin.
Hayes told CNBC at the Gamma Prime Investing Conference in Singapore that excessive investment flowing into AI data centers could easily lead to oversupply.
Hayes said that the current investment frenzy in AI is a "trillion-dollar-level misallocation of capital." He said that, at its core, this simply means there will be abundant and easily accessible large-scale computing power in the future.
However, this process may be very painful for financial markets.
Why an AI crash could be good for Bitcoin
Hayes believes that if the AI infrastructure boom ultimately triggers a major credit crisis, governments and central banks will eventually step in to intervene.
He stated that governments and central banks will inject additional liquidity into the financial system. In his view, Bitcoin and other cryptocurrencies stand to benefit from this excess liquidity.
Hayes said that a direct catalyst for Bitcoin's rise doesn't necessarily have to be an AI crash. Initially, significant deleveraging could be unfavorable for risk assets, but subsequent monetary policy responses might benefit equities.
He believes this scenario may occur around 2027 to 2028, when companies that promised massive computing power will need to earn enough revenue to justify the associated costs.
However, AI demand over the next year could also be strong enough to justify this large-scale infrastructure investment. Hayes acknowledges that this is also a plausible scenario. In other words, AI’s practical applications may enable businesses to gradually absorb these substantial computing costs.
This is not the first time Hayes has envisioned such a scenario.
In August this year, the co-founder of BitMEX compared the current AI infrastructure boom to the excessive credit expansion that preceded the 2008 financial crisis. However, he suggested that rather than viewing the current cycle as just another internet bubble, one should focus on the debt financing behind data centers and expensive computing hardware.
Hayes is not currently shorting the AI hype. However, he remains fairly confident that there is significant overbuilding in the market.