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- The Japanese banking sector is on the brink of a crisis that will force the sale of close to a trillion dollars worth of US Treasury bonds, which Arthur Hayes says will revive Bitcoin.
- The ex-BitMEX CEO says that the US Fed will jump in to prevent the open-market dump by offering to print dollars for the Bank of Japan, and this liquidity will inevitably flow into Bitcoin.
A crisis beckons in Japan. For years, Japanese banks have been scooping up US Treasury bonds to maximize their higher yield as the Bank of Japan’s interest rates have remained low. However, the dynamics have changed in recent years and Japanese banks are panic selling their bonds. According to market expert and former BitMEX CEO Arthur Hayes, what will follow will inevitably push Bitcoin to new highs.
Hayes, who co-founded what was at one point the largest Bitcoin derivatives exchange globally in BitMEX, shared his thoughts on the looming crisis in a recent blog post.
“Shikata Ga Nai” is an essay exploring a theory on how Bad Gurl Yellen can stop Japanese banks from dumping treasury bonds.
As always, money printer go brrrrr.
I hope ur stacking sats.
😘😘😘😘😘
— Arthur Hayes (@CryptoHayes) June 21, 2024
Hayes notes that several Japanese banks have been investing billions in US bonds and now stare at massive losses as interest rates in the US rise and bond prices dip. Just recently, the fifth largest bank in Japan revealed it was planning to sell $63 billion worth of US bonds. Collectively, Japanese banks hold over $850 billion, most of which is in US bonds, and a lot of it could hit the market.
Such huge sums hitting the open market would devastate the US bonds sector. The Fed can’t allow this, and Janet Yellen is expected to jump in. Hayes believes Yellen will direct the Bank of Japan to offer to buy all US bonds from commercial banks in direct transactions that don’t affect the open market.
To compensate the Bank of Japan, Yellen is expected to print hundreds of billions of dollars and hand it to BOJ through the Fed’s Foreign and International Monetary Authorities (FIMA) repo facility, which was established at the height of the COVID pandemic.
Hayes noted:
A rise in the FIMA repo facility indicates an addition of dollar liquidity to the global money markets. Y’all know what that means for Bitcoin and crypto … which is why I thought it necessary to alert readers about another avenue of stealth money printing.
In layman’s terms, imagine if Caroline Ellison, the CEO of Alameda, offered to buy all FTX tokens (FTT) at the prevailing market price before they crashed. This is what the Bank of Japan will offer with the US bonds, but unlike Ellison, who only had $10 billion at her disposal, the BOJ can keep buying infinitely, as Yellen will print as many dollars as necessary to prevent the US bonds from collapsing.
Hayes, whose new company Maelstrom has invested in Elixir, Ethena and Ether.fi, concludes:
Just as many began to wonder where the next jolt of dollar liquidity would come from, the Japanese banking system dropped Origami cranes composed of crisply folded dollar bills upon the laps of crypto investors. This is just another pillar of the crypto bull market.
Bitcoin changes hands at $64,290 and has traded sideways over the past day, with trading volume dropping 60% to $8 billion.
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