The Japanese banking sector is on the verge of a looming crisis that is expected to trigger the sale of nearly a trillion dollars in US Treasury bonds, ultimately leading to a surge in Bitcoin, according to Arthur Hayes.
The former CEO of BitMEX predicts that the US Federal Reserve will intervene to prevent the massive sell-off by offering to print dollars for the Bank of Japan, resulting in an inevitable flow of liquidity into Bitcoin.
Hayes highlights the impending crisis in Japan, where banks have been acquiring US Treasury bonds to capitalize on their higher yield due to the low interest rates set by the Bank of Japan. However, the situation has shifted in recent years, causing Japanese banks to panic and unload their bonds. According to Hayes, this chain of events will push Bitcoin to new heights.
In a recent blog post, Hayes, who co-founded BitMEX, shared his insights on the looming crisis, particularly focusing on a theory in his essay “Shikata Ga Nai” on how Janet Yellen can prevent Japanese banks from dumping treasury bonds.
He believes that Yellen will instruct the Bank of Japan to buy all US bonds from commercial banks through direct transactions that do not impact the open market. In return, Yellen is expected to print billions of dollars to compensate the Bank of Japan through the Fed’s FIMA repo facility.
Hayes also points out that the increase in the FIMA repo facility will inject additional dollar liquidity into the global money markets, with implications for Bitcoin and the crypto market. He likens the Bank of Japan’s offer to buy US bonds to Caroline Ellison, CEO of Alameda, offering to buy all FTX tokens at the current market price before they crash.
As a result, Hayes predicts a significant infusion of dollar liquidity into the crypto market, solidifying it as a pillar of the ongoing bull market. Currently, Bitcoin is trading at $64,290, with trading volume dropping 60% to $8 billion over the past day.