Arthur Hayes’ Maelstrom Hedges U.S. Election Uncertainty With Staked USDe; Holds Large BTC, ETH Bullish Bets

As an analyst with extensive experience in the digital asset market and having closely followed the crypto space for years, I find Arthur Hayes’ strategy to be a prudent one, especially given the current political climate in the United States. His decision to park 5% of Maelstrom’s funds in staked USDe is a smart move to hedge against election risk while maintaining large bullish bets in bitcoin, ether, and other cryptocurrencies.

As the U.S. election approaches next week, financial markets are holding their breath in anticipation of the political occurrence that has instilled “elevated levels of uncertainty.

Arthur Hayes, the top investment strategist at digital currency investment firm Maelstrom and a co-creator of BitMEX, is minimizing election uncertainties using Ethena Lab’s USDe stablecoin, all while keeping substantial optimistic wagers on bitcoin (BTC), ether (ETH), and other virtual currencies.

In a context of unpredictability, Maelstrom holds about half of its portfolio in staked USDe (a stablecoin from Ethena), generating approximately 13% returns. Simultaneously, we continue to hold substantial long positions in Bitcoin, Ether, and other digital assets. Hayes conveyed this information to CoinDesk via email.

In simpler terms, Ethena’s USDe is a type of digital dollar that maintains its value at $1 through a system involving collateralized stablecoins and a strategy known as hedged cash-and-carry arbitrage. This strategy also includes borrowing cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) in a process called shorting perpetual futures, for which a fee is charged (this fee is the yield). Additionally, by holding or staking USDe, users can earn rewards through the protocol. Staked USDe, abbreviated as sUSDe, is a token that provides these rewards.

By investing in the delta-neutral product, the fund is taking a precautionary measure to minimize market fluctuations that might occur around the election scheduled for November 5th, with the results expected on November 8th.

As an analyst, I’m involved with Maelstrom, a digital asset investment fund I manage under Arthur Hayes’ family office – co-founder of BitMEX. Our mission is to construct a portfolio of infrastructure companies that will underpin the next phase of trustless decentralization. Beyond my role in managing the fund, I also pen the esteemed monthly newsletter known as Crypto Trader Digest.

Watch out for a sore loser

In simpler terms, if there’s civil unrest due to losses in certain sectors like cryptocurrencies, Hayes anticipates these risky assets to experience volatile price movements for some time.

As per conventional news outlets, Republican Donald Trump and Democrat Kamala Harris are tied in the polls. However, on decentralized bettin platforms that favor cryptocurrency, it appears that Trump holds a substantial advantage over Harris against his rival Harris.

In case the election passes without causing any civil disturbance, the markets are expected to surge vigorously. After the election’s outcome is clear, with both parties accepting the result, all US dollars will be invested in cryptocurrencies, as stated by Hayes.

By this coming Friday, the Bitcoin options on Deribit are suggesting a potential volatility of approximately 3.8%. It’s worth noting that Bitcoin has a tendency to experience significant price fluctuations on seemingly random, non-event days in its history.

It doesn’t matter who wins

Regardless of who wins the U.S. presidential election, it’s unlikely that the outcome will significantly impact Bitcoin’s overall positive trajectory, since government budget deficits are expected to keep climbing. Many people view Bitcoin and gold as safe investments, providing a shield against rising budget deficits, which often lead to inflation.

“Both Trump and Harris will print money in the trillions of dollars. In the medium term, it doesn’t matter who wins. Crypto will do well. In the short term, the market understands the ways in which Trump will stimulate the economy because that is the traditional way it has been done in the past. Tax cuts combined with business-friendly deregulation but with no cuts in benefits is what he will do,” Hayes explained.

Paul Tudor Jones, a well-known trader, recently shared a similar viewpoint: inflation is expected to persist, regardless of whether Donald Trump or Kamala Harris wins the presidency. Meanwhile, certain cryptocurrency traders are placing wagers on a potential bitcoin surge beyond $80,000 following the election.

Potential war is a short-term risk

Overlooking the upcoming election, there’s a possibility that conflicts in the Middle East or Ukraine might intensify, which could temporarily cause distress for investors holding risky assets.

The most significant long-term danger could be if allies and adversaries of the U.S. initiate intense military conflicts following election uncertainty about who will take charge. In such a scenario, war becomes unattractive for investment in the immediate future, causing a global risk aversion. However, Hayes humorously noted that the inflationary impact of such a conflict could ultimately be beneficial for cryptocurrencies.

Hayes suggested adjusting the size of your positions based on the level of risk, and minimizing or avoiding the use of borrowed money (leverage) altogether.