AI Slowdown Could Trigger Government Intervention, Boosting Crypto

Arthur Hayes, co-founder of BitMEX, recently published an essay titled 'Safety First' where he argues that the potential slowdown in AI development could have a bullish effect on Bitcoin (BTC) and other cryptocurrencies. According to Hayes, a reduction in demand for computing power due to AI slowdown would put pressure on the huge debt financing AI data centers and infrastructure.

Hayes links this debt to private credit and insurance companies, warning that weaker AI cash flows could trigger credit downgrades and expose capital shortfalls in the insurance sector. This situation could lead to two possible government responses: either guaranteeing demand for AI compute and supporting data-center investment or intervening to prevent a broader financial crisis.

Hayes believes that both scenarios will involve greater government borrowing and monetary expansion, which would increase the amount of money circulating in financial markets, potentially encouraging investors to move into assets such as Bitcoin and other cryptocurrencies. As a result, he views the resulting government response as potentially positive for crypto.