Arthur Hayes: If the Fed Expands Its Balance Sheet to Stabilize the Yen and Japanese Government Bonds, It Will Benefit Risk Assets Like Bitcoin

Odaily News BitMEX co-founder Arthur Hayes analyzed in a recent article that the ongoing depreciation of the Japanese yen and the decline in Japanese government bond (JGB) prices are causing "unusual noises" in the global financial markets. He believes that the U.S. Federal Reserve and the Treasury Department may be forced to collaborate, directly intervening in the yen exchange rate and the JGB market by expanding the Fed's balance sheet, thereby injecting new liquidity into the global fiat currency system.

Arthur Hayes speculated that potential pathways might include: the New York Fed creating dollar reserves, instructing primary dealers like JPMorgan Chase to sell dollars and buy yen in the foreign exchange market to support the exchange rate, and allocating some of the funds to Japanese government bonds to suppress yields. This would lead to an increase in the "foreign currency-denominated assets" on the Fed's balance sheet, essentially equivalent to "printing money" to absorb the risks associated with the yen exchange rate and JGB interest rates.

He pointed out that the core objective of such operations is to stabilize the yen, curb the rise in JGB yields, prevent large-scale selling of U.S. Treasuries by Japanese funds for repatriation, thereby avoiding an uncontrollable surge in U.S. Treasury yields, and to some extent, enhance the competitiveness of U.S. exports. Meanwhile, global dollar liquidity would increase accordingly, and the exchange rates of currencies like the euro and the renminbi might also strengthen passively.

Arthur Hayes emphasized that this "disguised balance sheet expansion," which is not traditional QE, could ultimately provide medium- to long-term benefits for risk assets, including Bitcoin. Regarding trading strategy, he noted that a rapid strengthening of the yen is typically a signal of pressure on risk assets. Therefore, he would not rashly increase risk exposure before confirming that the Fed has formally intervened in the yen and JGB markets through balance sheet expansion.

He revealed that he has temporarily closed positions in highly leveraged Bitcoin-related targets like Strategy and Metaplanet; if his judgment is validated, he will re-enter the market. While waiting for policy clarity, his fund Maelstrom continues to accumulate Zcash, while positions in other high-quality DeFi tokens remain unchanged. Once the Fed confirms balance sheet expansion intervention, he will consider increasing positions in DeFi assets such as ENA, ETHFI, PENDLE, and LDO.