- Gold and precious metals have rallied as capital flees US Treasuries.
- Scott Bessent pushed back against claims of US currency intervention.
- Reflation typically boosts asset prices, including Bitcoin.
The global economy is entering a “reflation” phase. And that bodes well for Bitcoin.
After a period of cooling inflation, markets are now signalling prices are headed back up.
“Both commodity markets and FX markets are sending clear signals for a renewed global reflation,” André Dragosch, head of research at Bitwise Europe, told DL News.
Reflation occurs when inflation pressures reverse, shifting from falling back to rising, typically driven by rising commodity prices, weakening currencies, and money printing.
Capital, Dragosch argued, has been fleeing US Treasuries into commodities like gold — which hit a new all-time high of $5,500 on Wednesday — and silver, which has risen by 50% since the beginning of the year.
What about Bitcoin?
The world’s largest crypto has been sluggish, but reflation has historically meant one thing: higher prices.
Fed’s foray into Japan
Dragosch believes the Federal Reserve has already begun intervening in foreign exchange markets alongside the Bank of Japan.
That’s also a theory proposed by former BitMEX CEO Arthur Hayes.
“The Fed has likely intervened in FX markets alongside the Bank of Japan and Japanese Ministry of Finance more recently,” Dragosch said.
Such an intervention would mean the Fed is printing dollars to buy yen and using those yen to then purchase Japanese government bonds, basically expanding its balance sheet.
Hayes reckons the same.
In his latest essay, Hayes said that the yen has fallen against the dollar while Japanese bond yields have jumped. If true, it would be an ominous amalgamation, as it shouldn’t necessarily happen if investors still believed in the government.
But Scott Bessent, the US Secretary of the Treasury, was quick to dismiss claims that the US is intervening in the Japanese Yen.
“Absolutely not,” he told CNBC when asked if the Trump administration was intervening in Asian currency markets. “We have a strong dollar policy.”
Bitcoin still lags
While the world watches gold topple a new record high of $5,500, Bitcoin hasn’t budged.
To figure out when Bitcoin might rally, Hayes explained that he’s watching the Fed’s “Foreign Currency Denominated Assets” line item on its weekly balance sheet report.
If that number rises, it would confirm Fed intervention and signal a new liquidity cycle.
“Bitcoin will pump alongside a growing Fed balance sheet,” Hayes wrote.
