The main idea of the essay: The calls from Anthropic, OpenAI, and SpaceX to slow down AI development are not out of concern for humanity, but rather a consequence of the market not being ready to buy their products at current prices. Chinese models cost a hundred times less, and the quality gap is rapidly closing. But for crypto investors, this doesn't matter, because both scenarios lead to money printing.
Key takeaways:
Behind AI labs lies over $1 trillion in investment-grade debt and hundreds of billions in riskier loans. The labs themselves don't generate profits and depend on off-balance-sheet support from profitable companies like Nvidia, Google, and Microsoft. If the labs slow down their procurement of computing power, the debts won't go away—but their ability to service those debts will decline.
The ultimate holders of this debt are American insurance companies, or more precisely, their millions of customers. Hayes dissects the scheme: large PE funds like Apollo, KKR, and Brookfield have bought up insurance companies, appointed themselves as asset managers, and stuffed insurers' portfolios with debt from AI data centers and private credit. The capital buffer is provided by affiliated reinsurers registered in states like Vermont, where reporting can be kept confidential. According to analyst Nick Nemeth, the volume of these "fabricated" reinsurance assets amounts to $1.54 trillion.
The trigger for the crisis: if AI labs stop consuming computing power at previous volumes, rating agencies will downgrade the debt ratings of data centers. This will force insurers to increase their capital buffers—but the affiliated reinsurers don't actually have any real money. From there, insolvency becomes visible.
Hayes draws a direct analogy with Terra Luna: the scheme is the same, only instead of a stablecoin backed by shi-tokens, we have AI data center debt; and instead of Do Kwon, we have New York-based PE bosses.
According to Hayes, Trump has two paths: become the ultimate buyer of computing power for “national security” reasons, or print money to bail out the insurance industry. Both options mean an increase in the money supply and, consequently, a rise in BTC and crypto prices. Bessent and Warsh, according to Hayes, won't allow a public credit event because they remember the lesson from 2008: then Obama promised to punish bankers but approved the bailout. In 2028, AOC won't be so accommodating, so the administration will prefer to pump money into the problem ahead of time.
Conclusion: the turbulence in the crypto market following the mini-rally at the end of August will soon come to an end. The amount of dollars in the system will continue to grow, and BTC and select altcoins will rise in price. As the founder of the crypto-AI project Flop Network, Hayes adds that this situation is ideal for him: the cost of computing power will fall due to overproduction, and the influx of printed dollars will drive investors into crypto.