Arthur Hayes, former CEO of BitMEX, recently suggested a bold financial strategy he believes could put investing in cryptocurrency in “easy mode.” In a Medium blog post, Hayes argues that the Fed should team up with the Bank of Japan for unlimited dollar-yen swaps to stop the yen’s slide and inadvertently boost Bitcoin.
“A series of extremely long essays will be needed to fully explain why the dollar-yen exchange rate is the most important global economic variable. This is my third attempt at describing the chain of events that led us to crypto Valhalla.”
In his extensive analysis on Medium, Hayes cited veteran investor Russell Napier, emphasizing the “lose-lose situation” the US and Japan face without such intervention.
Here’s how he believes this strategy will go into place.
The Competitive Landscape: Japan vs. China
According to Hayes, this swap agreement would operate similarly to yield curve control.
The Federal Reserve would provide the BOJ with an unlimited supply of dollars in exchange for yen, leading to a devaluation of the US dollar and increased global dollar liquidity.
If this move isn’t made and the BOJ has to raise interest rates instead, it would force banks, insurance funds, and other institutions to sell US Treasuries, potentially destabilizing financial markets.
“The depreciation of the US dollar means a sharp increase in global US dollar liquidity. This will benefit the cryptocurrency market, led by Bitcoin,” he explained.
“The Easy Button” is an essay on why USDJPY is the most important macro variable. YCC is right around the corner and so is $BTC = $1mm.
— Arthur Hayes (@CryptoHayes) May 21, 2024
As export giants, Japan and China are vying for emerging market buyers. If Japan props up the yen, China might counter by slashing the yuan’s value.
“Crypto booms, as there is more dollar and yuan liquidity floating in the system,” Hayes wrote on Medium, emphasizing the broader implications of increased liquidity on global markets.
Hayes further notes that Japan’s Ministry of Finance and the BOJ could use these newly acquired dollars to stabilize the yen by purchasing it directly, bypassing the need to sell US Treasury securities.
The Dollar-Yen Swap Line: A Crypto”Easy Button”
(BTCUSD)
With US data easing rate hike fears, liquidity is on the rise. Meanwhile, China is going all-in with massive bond issuances and real estate bailouts, effectively launching QE for the property market.
If money printing like this continues—not to mention if the US strikes a dollar-yen swap or something similar—it will be the golden ticket for those investing in Bitcoin.
“Bitcoin is the best-performing asset in the face of global fiat debasement,” Hayes asserted, pointing to Bitcoin’s resilience amid these economic shifts.
Spot BTC ETF inflows have surged, with $716 million in net inflows last week alone, reversing April’s outflows.
Bitcoin is up 8.11% on the week, trading at $69,500.08.
Is Arthur Hayes a Wizard, or Is This Wishful Thinking?
On a podcast hosted by Arrington Capital, Hayes mentioned that the dollar-yen swap would open an “unlimited spigot of dollar liquidity, which will push up asset prices,” including cryptocurrencies.
“This is the lite version of why all crypto traders must constantly monitor the dollar and yen currency pair,” Hayes advised.
Hayes’ proposal for an unlimited dollar-yen swap could mark a significant policy shift that could reshape global liquidity and investing dynamics.
While it may not happen exactly the way he wants, he’s right that the Japanese markets are caught in a Catch-22 between their own shrinking economy and the super massive blackhole that is the US dollar.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
