BitMEX founder Arthur Hayes has proposed a theory that Bitcoin could break out of its current "sideways funk" if the United States Federal Reserve intervenes to support the struggling Japanese bond market through money printing. Hayes outlined his analysis on Wednesday, suggesting that the Fed "could be printing money to manipulate the yen and JGB [Japanese government bond] markets."
Hayes points to a dual crisis in Japan where the yen is weakening while Japanese government bond yields are rising simultaneously, signaling a potential loss of market confidence. This situation also impacts the United States because Japanese investors might sell US Treasuries to buy higher-yielding Japanese bonds instead. "Will a meltdown of the yen and JGB markets cause some sort of money printing by the BOJ [Bank of Japan] or the Fed? The answer is yes," said Hayes. He emphasized, "This discussion of Japanese financial markets is important because for Bitcoin to exit its sideways funk, it needs a healthy dose of money printing."
Hayes believes the Fed's intervention mechanism could serve as a key liquidity trigger for Bitcoin. He theorizes the Fed would intervene by creating dollar reserves with banks like JPMorgan, selling dollars for yen—which would strengthen the yen—and then using the yen to purchase Japanese Government Bonds, thereby lowering their yields. Hayes explains this would expand the Fed's balance sheet under "Foreign Currency Denominated Assets," stating, "This Fed intervention is just what the filthy fiat system needs to limp along a little longer."
The former BitMEX CEO appears to be positioning his investments based on this theory, waiting for confirmation of central bank action. "Bitcoin fell as the yen strengthened against the dollar. I will not increase risk before I confirm the Fed is printing money to intervene in the yen and JGB markets," he said, indicating he is monitoring the Fed's weekly H.4.1 balance sheet report for signs of such intervention.
This analysis comes amid broader currency market movements. The US dollar index (DXY) slumped to 95.6, its lowest level since January 2022, representing a 10% slide over the past year. Despite this, former US President Donald Trump commented on the dollar's strength in a recent speech, highlighting historical tensions over currency devaluation practices.
