Hayes believes Federal Reserve support for Japan could boost Bitcoin’s value
BitMEX founder, Arthur Hayes, proposed that bitcoin could potentially break out of its stagnant state if the Federal Reserve were to provide support to Japan’s government bond market by injecting new liquidity into the system. Hayes highlighted a concerning scenario in Japan where the yen is weakening while the yields on Japanese government bonds (JGBs) are on the rise.
He further elaborated that this development could have a ripple effect on US markets if Japanese investors decide to offload their US Treasuries in favor of investing in higher-yielding JGBs. Hayes emphasized the importance of the discussion surrounding Japanese financial markets, stating that for bitcoin to move out of its stale period, it would require a significant injection of money through printing.
In terms of how the Fed could potentially intervene to alleviate the situation, Hayes outlined a strategy where the Federal Reserve could generate dollar reserves with major banks, exchange them for yen to provide support to the struggling Japanese currency, and then utilize the yen to purchase JGBs in order to drive down yields. This action would result in an expansion of the Fed’s balance sheet under the category of “Foreign Currency Denominated Assets.”
Hayes expressed his belief that such intervention by the Fed aligns with the current needs of the fiat monetary system and could serve to sustain it for a bit longer. He mentioned keeping a close eye on the Fed’s weekly H.4.1 balance sheet report for any indications that could prompt an adjustment in the level of risk he is willing to take on.
Attributing recent price movements to the yen, Hayes pointed out that bitcoin faced downward pressure as the yen exhibited strength against the US dollar. Concurrently, the US Dollar Index dropped to 95.6, reaching its lowest point since January 2022, as reported by TradingView.
These observations were made amidst statements by President Donald Trump commending the performance of the dollar while simultaneously criticizing both Japan and China for repeatedly devaluing their respective currencies. Hayes’ insights shed light on the interconnected and dynamic nature of global markets and how actions or policies in one region can have far-reaching implications on various asset classes and currencies worldwide.
