Arthur Hayes argued that a break in global monetary policies would pave the way for a strong rise for Bitcoin and cryptocurrencies. The former BitMEX CEO suggested that the US Federal Reserve could expand its balance sheet in order to reduce pressure on the Japanese yen and Japanese government bonds. In his evaluation titled “Woomph” published on January 28, Hayes stated that the process in question would create an indirect but effective liquidity increase. The analysis focuses on what kind of chain effect the Fed’s possible steps could have on global markets.
Exchange Rate and Bond Tension on the Fed-Japan Line
According to Hayes, deepening exchange rate pressure in the Japanese economy and rising Japanese Government Bond yields pose a strategic risk for the US bond market. Japanese investors selling US Treasury bonds and moving their funds back to the country due to rising yields stands out as a scenario that could increase Washington’s borrowing costs. Hayes stated that the US Federal Reserve could intervene in foreign exchange and bond markets within the framework of legal powers to prevent such a wave.
The proposed mechanism is based on the coordination of the Exchange Stabilization Fund of the US Treasury Department and the New York Fed. According to the scenario, the Fed may purchase Japanese yen by creating new dollar reserves; The yen is then channeled into Japanese Government Bonds, strengthening the currency and suppressing bond yields. Hayes interpreted the “rate check” move made by the New York Fed on the USD/JPY parity on January 23 as a conscious signal given to the markets.
Reflections of Increasing Liquidity on the Cryptocurrency Market
Arthur Hayes argues that the direct result of such an intervention would be an increase in global dollar liquidity. In their own words, expansion in the amount of paper money could mechanically push up the fiat value of Bitcoin and qualifying altcoins. According to him, a possible weakening in the dollar index creates a suitable pricing environment for risky assets.
On the market front, the cautious stance continues. Bitcoin was trading around 89 thousand dollars, below the 90 thousand dollar threshold, at the time the analysis was written. Market watchers such as QCP Capital and Michaël van de Poppe also emphasize that bond interventions originating from Japan may be decisive in terms of risk appetite. Hayes refrains from presenting his approach as a definitive prediction, stating that the increase in the “Foreign Currency Denominated Assets” item in the Fed’s balance sheet will be a confirmation signal. For crypto investors, all eyes are on the balance sheet data to be announced in the coming weeks.
