The Japanese banking industry is teetering on the edge of a crisis that is expected to result in the sale of nearly $1 trillion in US Treasury bonds, a move that Arthur Hayes believes will give a boost to Bitcoin.
The former CEO of BitMEX predicts that the US Federal Reserve will intervene to prevent the mass dumping of bonds by offering to print dollars for the Bank of Japan. This injection of liquidity is anticipated to flow into Bitcoin, driving its value up.
A crisis looms in Japan as the country’s banks have been investing in US Treasury bonds for years to take advantage of their higher yields, especially as the Bank of Japan has maintained low interest rates. However, with the changing dynamics in recent years, Japanese banks are now in a panic to sell off their bonds. According to market expert and former BitMEX CEO Arthur Hayes, this impending move will inevitably propel Bitcoin to new heights.
Hayes, who co-founded BitMEX, the largest Bitcoin derivatives exchange at one point, shared his insights on the looming crisis in a recent blog post.
In his essay “Shikata Ga Nai,” Hayes explores a theory on how former US Treasury Secretary Janet Yellen can prevent Japanese banks from dumping treasury bonds. He also humorously notes that the “money printer go brrrrr” and encourages people to stack sats, referring to stacking Satoshi, the smallest unit of Bitcoin.
Hayes points out that several Japanese banks are facing significant losses due to their investments in US bonds as interest rates in the US rise and bond prices decline. Recently, Japan’s fifth-largest bank announced plans to sell $63 billion worth of US bonds. Collectively, Japanese banks hold over $850 billion, most of which is in US bonds, and a significant portion of it could flood the market.
The impact of such large sums hitting the open market would be devastating for the US bond sector. Hayes believes that the Fed cannot allow this, and Yellen is expected to step in and direct the Bank of Japan to buy all US bonds from commercial banks in direct transactions that do not affect the open market.
To compensate the Bank of Japan, Yellen is anticipated to print hundreds of billions of dollars and provide it to BOJ through the Fed’s Foreign and International Monetary Authorities (FIMA) repo facility, which was established during the COVID pandemic.
In layman’s terms, Hayes likens this move to Alameda CEO Caroline Ellison offering to buy all FTX tokens (FTT) at the prevailing market price before they crashed. However, unlike Ellison, who had limited funds, the Bank of Japan can keep buying infinitely, as Yellen will print as many dollars as necessary to prevent the US bonds from collapsing.
Hayes, whose new company Maelstrom has invested in Elixir, Ethena, and Ether.fi, concludes by highlighting the impact of this move on the crypto market and Bitcoin’s value.
Bitcoin is currently trading at $64,290 and has maintained a sideways trend over the past day, with trading volume dropping by 60% to $8 billion.