Summary:

Arthur Hayes believes the Iran conflict and the global AI race could accelerate money printing and benefit Bitcoin.
Hayes says rising military spending and AI infrastructure investment are creating conditions favorable for crypto markets.
He argues Bitcoin has been outperforming traditional assets like gold and US tech stocks since February.
Hayes predicts Bitcoin reclaiming $126,000 is a "foregone conclusion" as more fiat enters the system.
The comments come as markets remain volatile amid geopolitical tensions and macro uncertainty.

Bitcoin's latest rebound is happening against a tense global backdrop. Markets are trying to digest growing instability in the Middle East, renewed concerns around inflation, and an aggressive global race to dominate artificial intelligence infrastructure. While many investors see those developments as warning signs, Arthur Hayes believes they may become the exact forces that drive Bitcoin higher again. In a new Substack essay titled The Butterfly Touch, Hayes argued that the combination of war spending and AI competition is setting up the perfect environment for another major crypto rally. According to Hayes, the United States and China are both entering a period where national security priorities are forcing governments to spend heavily, even if that means expanding debt and loosening financial conditions.

Hayes argued that AI development is no longer viewed as just a commercial competition between technology companies. Governments increasingly see it as strategic infrastructure tied directly to military strength, economic power, and geopolitical influence.

"The combination of the political will to win the AI race and the financial will to fund the build-out with printed money and bank loans produces the perfect environment for crypto," Hayes said.

He added that the amount of fiat currency entering the global system is likely to accelerate as countries compete to fund AI data centers, electricity infrastructure, semiconductor manufacturing and military expansion at the same time.

"There will be vastly more units of fiat tomorrow than today, and the rate of change is accelerating due to rapidly increasing yearly AI and electrification CAPEX expenditures," Hayes wrote.

That view reflects a growing argument inside crypto markets that Bitcoin benefits during periods of aggressive liquidity expansion. When governments print more money and central banks loosen financial conditions, scarce assets like Bitcoin often attract attention as alternative stores of value.

Why Hayes Thinks Bitcoin Could Reach $126K Again

Hayes believes geopolitical instability is adding another layer to Bitcoin's setup. The ongoing Iran conflict, combined with rising military spending across several major economies, is creating what he describes as an inflationary environment. Governments are increasing defense budgets while also attempting to secure domestic energy systems, AI infrastructure and manufacturing capacity. According to Hayes, that combination will likely force additional monetary easing and debt expansion. He also pointed to a broader shift happening globally, where some US allies may prioritize domestic infrastructure and strategic investment instead of continuing to allocate as heavily toward US Treasurys and American equities. That matters because weaker foreign demand for US debt could increase pressure on policymakers to support markets with additional liquidity.

Hayes previously argued earlier this year that the US Federal Reserve could eventually ease monetary policy to help finance geopolitical tensions involving Iran. Now he says Bitcoin is already responding to those expectations.

"The politicians support this money printing out of real and perceived necessity. That is why Bitcoin post-February 28th is outperforming the other major risky assets such as gold and US tech stocks," Hayes added.

According to CoinmarketCap, Bitcoin has traded between roughly $79,000 and $82,000 over the past week as traders reacted to fresh geopolitical uncertainty and broader market volatility. At the same time, gold has also continued climbing, although Hayes argues Bitcoin's relative performance since February has been stronger. His conclusion was direct:

"Bitcoin bottomed earlier this year at $60,000, and with a tailwind of trillions of dollars and yuan yet to be created at its back, retaking the $126,000 is a foregone conclusion." Source

That target would bring Bitcoin back above its previous all-time high and place it firmly back into price discovery territory.

Crypto Markets Are Watching Liquidity

The crypto market has spent months caught between optimism and caution. On one side, institutional adoption continues to expand, stablecoin usage keeps growing, and governments around the world are increasingly discussing digital asset frameworks. On the other side, investors remain nervous about geopolitical tensions, interest rates and slowing global growth. Hayes' thesis focuses on one idea above everything else that liquidity eventually matters more than fear. Historically, Bitcoin has often struggled during the first shock of geopolitical events as investors move toward cash and reduce exposure to risk assets. But longer-term, periods of large-scale monetary expansion have frequently supported crypto prices. That is why some analysts believe the current cycle could look different from previous years.

The next phase may be driven by macroeconomic competition between governments trying to secure strategic advantages in AI, energy and defense. The AI race itself is becoming incredibly expensive. Building advanced AI systems requires enormous amounts of computing power, electricity infrastructure and semiconductor manufacturing. Governments and corporations are already committing hundreds of billions of dollars toward that buildout. Hayes believes that scale of spending cannot happen without significantly expanding liquidity across the global financial system. If that happens, Bitcoin could continue benefiting from its position as a scarce digital asset outside traditional monetary structures. For now, volatility remains high. Markets are still reacting to headlines tied to the Iran conflict and broader economic uncertainty and in that environment, Hayes believes Bitcoin's path back toward $126,000 is becoming increasingly difficult to ignore.