Arthur Hayes’ Crypto Strategy Amid Election Risks

With the U.S. election just a week away, markets are bracing for potential volatility. Arthur Hayes, Chief Investment Officer of Maelstrom and co-founder of BitMEX, is taking a strategic approach by hedging with Ethena Lab’s USDe stablecoin while keeping significant positions in Bitcoin (BTC), Ether (ETH), and other cryptocurrencies. Hayes hopes to balance short-term election risks with long-term optimism for crypto’s resilience.

“Given the uncertainty, Maelstrom has 5% of the fund in staked USDe (Ethena USD), earning roughly 13%,” Hayes shared with CoinDesk. This hedge includes a delta-neutral strategy designed to safeguard against potential election-related price swings, especially as results unfold on Nov. 8.

Ethena’s USDe is a synthetic dollar stablecoin that uses a hedged cash-and-carry arbitrage strategy to maintain its $1 peg. The stablecoin’s staking system automatically generates protocol rewards through funding fees from shorting perpetual BTC and ETH futures. By holding staked USDe (sUSDe), Maelstrom’s approach offers a defensive layer while earning a yield, leaving the fund flexible to capitalize on post-election market movement.

Managing Election Volatility: Maelstrom’s Defensive Strategy

The timing of Maelstrom’s hedge reflects Hayes’ cautious outlook for the election’s aftermath, especially if contentious results fuel civil unrest. Traditional polls show a tight race between Republican Donald Trump and Democrat Kamala Harris, but decentralized prediction markets indicate Trump may hold a pro-crypto lead.

“If the election passes without social unrest, the markets will surge,” Hayes remarked, explaining that a clear outcome would allow Maelstrom to fully deploy its sUSDe into crypto positions. This agility is part of Maelstrom’s mandate to build a diversified crypto portfolio, aiming to support decentralized infrastructure companies while managing exposure to macroeconomic shifts.

However, Hayes doesn’t believe the election will drastically change Bitcoin’s long-term prospects. He anticipates U.S. budget deficits will continue to climb, regardless of the winner, underscoring crypto and gold’s roles as safe-haven assets. “Both Trump and Harris will print trillions of dollars. In the medium term, it doesn’t matter who wins. Crypto will thrive,” Hayes explained. This pro-inflationary outlook aligns with legendary trader Paul Tudor Jones’ view that both candidates are likely to drive inflation through monetary policy.

Escalation of Global Tensions: A Short-Term Macro Risk

Beyond the U.S. election, Hayes warns of short-term risks linked to escalating tensions in the Middle East and Ukraine, especially if uncertainty over leadership stalls U.S. decision-making. “War is un-investable in the short term,” Hayes stated, emphasizing that military conflict would disrupt markets globally before eventually driving up inflation, which could ultimately benefit crypto.

According to Hayes, sizing positions conservatively and using minimal leverage is key to managing this risk. While geopolitical events could disrupt risk assets, Hayes remains focused on a strategy that balances hedging and exposure to cryptocurrency, underscoring the importance of adaptable, lower-risk investment approaches.

A Post-Election Outlook on Crypto

As markets approach the election and its potential fallout, Hayes’ strategy reflects a pragmatic approach to an unpredictable period for digital assets. By holding sUSDe in Ethena’s protocol to guard against volatility, Maelstrom’s portfolio remains insulated, while Hayes’ optimism in Bitcoin and Ether’s long-term resilience remains undiminished. With top traders predicting BTC could rally to $80,000 post-election, Hayes’ strategic positioning within a high-uncertainty environment aligns with a broader trend of institutional confidence in crypto.

Arthur Hayes’ election strategy combines hedged stability with bullish crypto positions, aiming to balance the short-term risks of political and geopolitical uncertainty. With post-election markets likely to impact crypto, Maelstrom’s dual approach—through USDe hedging and continued Bitcoin and Ether allocations—could provide a roadmap for managing risk in a turbulent environment. As the election nears, Hayes’ stance highlights both the caution and potential rewards that come with navigating crypto markets during uncertain times.