Arthur Hayes: Yen Will Fluctuate, Fed's Balance Sheet Expansion Benefits Bitcoin

Arthur Hayes, co-founder of BitMEX, pointed out in his article "Yen-quake" that the yen is currently undervalued and needs to appreciate under the pressures from the US-China relations and domestic political pressures in Japan. He analyzed three possible paths, suggesting that the Japanese Ministry of Finance might use the Fed's FIMA repo tool to pledge its US Treasury holdings to the Fed in exchange for dollars, then sell dollars in the foreign exchange market to buy yen, and subsequently funnel the yen back into Japanese government bonds and the stock market. This move would expand the Fed's balance sheet, increase dollar liquidity, and simultaneously drive up the value of the yen, alleviating yen arbitrage trading. Historically, the Fed's balance sheet expansion has been highly correlated with Bitcoin's rise, and this operation is expected to bring significant liquidity benefits to Bitcoin and the cryptocurrency market.

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