Arthur Hayes predicts Bitcoin boost as Federal Reserve mulls yen support

Arthur Hayes, co-founder of cryptocurrency exchange BitMEX, has sparked fresh debate in financial markets by suggesting that potential US Federal Reserve intervention to support the weakening Japanese yen could spark a major rally in Bitcoin (BTC).

Hayes says that if such support involves increased US dollar liquidity — effectively “printing money” — it may fuel a significant surge in Bitcoin’s price. His remarks come amid growing expectations that Japanese authorities may intervene in currency markets to shore up the yen, after a string of sharp moves in the dollar-yen exchange rate recently raised speculation of intervention.

Traders have interpreted large one-day gains in the yen as a sign that central banks could be readying to take action. Some traders have also said the New York Fed has reached out to large banks to gauge market conditions in the yen market, fueling rumors that US monetary authorities are considering possible intervention.

Hayes explained in a write-up on the social networking site X that if the Federal Reserve responded by creating bank reserves—often referred to by critics as “printing dollars”—and then proceeds from these reserves to sell the dollars for yen, this would expand market liquidity worldwide.

To him, they might be placed on the Fed’s weekly balance sheet as part of foreign-currency-denominated assets.

Analysts raise concerns regarding the fate of the dollar 

On Friday, January 23, reports indicated that the yen posted its biggest single-day gain against the dollar since August after officials from the United States and Japan signaled they are ready to intervene to stop the yen’s decline.

Later that day, the New York Fed reached out to potential trading partners, as instructed by the Treasury Department, to review exchange rates. In response to this announcement, several individuals expressed mixed reactions, sparking a heated debate. 

In attempts to address this controversy, sources noted that the Fed was inquiring about current rates, particularly for the dollar/yen pair, if potential trading partners decided to trade dollars and yen in the currency markets. 

It is worth noting that the New York Fed executes transactions on behalf of the Treasury. Meanwhile, reports unveiled that a rate check typically indicates that authorities are anxious regarding currency stability and, therefore, could trigger immediate intervention.

On the other hand, financial reports dated January 23 noted that the dollar declined by 1.7% compared to the yen. This situation intensified when these reports confirmed that the dollar weakened against other Asian currencies, including the Taiwanese dollar and the South Korean won.

The unexpected result followed a volatile week in the US and Japan financial markets, highlighting gaps in current policy frameworks on both sides of the ocean. 

Investors expressed worries about increased government borrowing 

Earlier, US Treasury bond yields soared amid a selloff that several traders anticipated was driven by concerns about US President Donald Trump’s intentions regarding Greenland. 

However, this was not the case for Scott Bessent, the United States Secretary of the Treasury. According to him, this situation stemmed from the impact of surging yields on Japanese government bonds.

Following Bessent’s claim, sources reported that long-term Japanese government bonds declined sharply as investors raised concerns about increased government borrowing amid a surprise election scheduled for February 8 this year.

In the meantime, the Prime Minister of Japan, Sanae Takaichi, who just assumed her role in October, alleged that she requested the election to strengthen her coalition government’s hold on power. 

After conducting research, analysts found that the main reason for the sudden decline in bond prices was Takaichi’s pledge to suspend taxes on the sale of groceries for 2 years during the election.

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