Arthur Hayes Predicts Bitcoin Rally as Fed Signals Liquidity Boost

Former BitMEX CEO Arthur Hayes has proposed that the U.S. Federal Reserve could soon expand its balance sheet to support the Japanese yen and government bonds.

He argued that this covert money printing would directly lift the price of Bitcoin (BTC) and other cryptocurrencies.

Hayes Links Yen Stress, Fed Action, and Crypto Markets

In a January 28 essay titled “Woomph,” Hayes stated that the Fed has the legal authority to intervene in foreign exchange and bond markets, which would address economic pressures in Japan that threaten U.S. Treasury stability. According to him, the implication of that move for crypto markets is simple:

Hayes constructed a scenario where the New York Federal Reserve, coordinating with the U.S. Treasury, creates new dollar reserves to buy Japanese yen. Those yen would then be used to purchase Japanese Government Bonds (JGBs). The goal would be to strengthen the yen and lower JGB yields, preventing Japanese investors from selling U.S. Treasuries to repatriate funds since a mass sale could spike U.S. borrowing costs.

He pointed to a concrete event as potential evidence: a “rate check” by the New York Fed on USD/JPY exchange rates on January 23. Analysts at QCP Capital noted on January 26 that this action hinted at official sensitivity to a weakening yen and made traders defensive. Hayes interpreted these actions as the Fed “deliberately and publicly telegraphing its intentions.”

The legal mechanism, according to the crypto veteran, involves the Treasury’s Exchange Stabilization Fund and the Fed’s authority to hold foreign currency assets. He wrote,

In his opinion, confirmation would be visible in the weekly growth of the “Foreign Currency Denominated Assets” on the Fed’s balance sheet.

Market Skepticism Remains Despite Liquidity Thesis

Hayes’ prediction contrasts with a prevailing cautious tone in crypto markets. Bitcoin has struggled to hold above $90,000, trading around $89,000 at the time of this writing after briefly dipping lower.

Other experts have also looked to Japan for macro direction. Last week, market watcher Michaël van de Poppe suggested that the Japanese Central Bank needed to intervene in the bond markets, which would allow risk-on assets to continue moving.

Meanwhile, Hayes has acknowledged that his idea is currently a theory, stating, “What I will present is a theory which the actual flow of money… doesn’t support yet.” He has made his trading contingent on observing the Fed’s balance sheet expand. His view is that such intervention would create dollar liquidity globally, weakening the dollar index and providing fuel for asset price inflation.

For crypto investors, the BitMEX cofounder’s analysis frames the upcoming reports on the Fed’s balance sheet as critical data points for judging the market’s next major move.

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