- The Fed will print dollars to buy yen and Japanese government bonds, Arthur Hayes wrote.
- The BitMEX founder is watching a specific Fed balance sheet line item for confirmation.
- A strengthening yen could trigger risk-off moves before the rally begins.
Arthur Hayes has come up with a new theory on what will send Bitcoin higher: a Federal Reserve bailout of the distressed Japanese markets that’ll be disguised as currency intervention.
The BitMEX co-founder and crypto angel investor argued in a new essay that the US central bank will soon print dollars to buy yen, then use those yen to purchase Japanese Government Bonds, also known as JGBs.
If the Fed goes ahead, the move would expand its balance sheet — basically bringing about another bout of money printing.
“Bitcoin will pump alongside a growing Fed balance sheet,” Hayes wrote. “It might not happen on your timeframe if you are 100x leveraged trading [1 million] candles on some shitcoin perp, but Bitcoin and quality shitcoins will mechanically levitate in fiat terms as the quantity of paper money rises.”
Hayes has already predicted that Bitcoin is coiling to $110,000 and beyond.
While gold and commodities have surged, Bitcoin has stayed stuck trembling around $90,000 despite Trump’s return to the White House and his public pressure on the Fed. Hayes theory reckons that Japan’s bond market crisis is the catalyst that forces the Fed’s hand.
“For Bitcoin to exit its sideways funk it needs a healthy dose of money printing,” Hayes said.
Signs of stress
Japan’s financial markets are flashing warning signs, Hayes said.
The yen has weakened sharply against the dollar while Japanese bond yields have spiked — a menacing combination that shouldn’t happen if investors still have confidence in the government, Hayes said.
A weak yen imports inflation since Japan is a net energy importer.
Worse yet, falling bond prices are racking up massive unrealised losses for the Bank of Japan, the market’s largest local bond holder.
Why does the US care? Well, because Japan holds $2.4 trillion in US Treasuries, Hayes noted. So if Japanese bond yields keep rising, Japan will have to sell those treasuries to buy their own bonds instead.
That could spike US borrowing costs, which is exactly what the Trump administration wants to avoid.
Foreign Currency Denominated Assets
Treasury Secretary Scott Bessent can intervene in currency markets using the Exchange Stabilisation Fund, Hayes said.
The ESF is a Treasury-funded war chest created in 1934 that allows for intervention without Congressional approval.
But the Treasury Department can’t print money. It’s the Fed that can.
So Hayes is watching for changes to the Fed’s “Foreign Currency Denominated Assets” line item.
“If the Foreign Currency Denominated Assets line item on the Fed’s balance sheet rises week-over-week, then it’s time to increase my holdings of Bitcoin,” Hayes wrote.
Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at psolimano@dlnews.com.
