Arthur Hayes: Rising Dollar Liquidity Will Drive Bitcoin and Crypto Higher

Odaily Planet Daily News: Arthur Hayes posted on the X platform, stating that his article "Yen-quake" will explain how Buffalo Bill Bessent plans to manipulate the USD/JPY exchange rate and restart the money printing machine.

Arthur Hayes said that over the past decade, the continued weakening of the yen has driven gains in global asset markets, but this situation will eventually come to an end. The yen is the lowest-valued currency globally and is also a point of contention among the United States, China—the two major powers—and ordinary Japanese voters. There are three ways to resolve the yen issue, but the U.S. Treasury and Japanese politicians favor only one of them.

He will explain the mechanics of each yen appreciation method and illustrate why the last option is the preferred one; he will then discuss how to execute this third option at the political level. He said that as dollar liquidity rises significantly, Bitcoin and cryptocurrencies will move higher.

The three options include:.

1. A significant rate hike by the Bank of Japan, eliminating the USD/JPY interest rate differential, at least on the short end.

2. The government persuading domestic institutions and public entities such as GPIF to change their investment mandates, selling overseas assets and buying local assets.

3. Preferred option: Japan's Ministry of Finance sells its U.S. Treasury holdings to the Federal Reserve through repurchase agreements in exchange for dollars; it then sells dollars and buys yen in the foreign exchange market.

Arthur Hayes said that before getting into the details, speculators should think about why the yen's appreciation is being discussed now. Over the past few decades, many people have claimed that the yen was about to appreciate, triggering a global unwind of carry trades. Two weeks ago, monetary policy officials from the United States and Japan carried out a joint exchange rate manipulation operation, merely calling it intervention euphemistically. U.S. Treasury Secretary Buffalo Bill Bessent said he hopes to raise the counterparty limit for the FIMA repurchase facility so that Japan's Ministry of Finance can use its massive asset reserves to defend the yen. Japan's Ministry of Finance also said it is working closely with the United States to push the USD/JPY exchange rate lower. Relevant officials are signaling to the market that they support a shift in global monetary relations, so the market must pay attention to this.