In a recent article, Arthur Hayes, one of the leading figures in the cryptocurrency world, discussed the potential impact of US monetary policies on Japanese banks.
Hayes predicts that Japanese banks will sell large amounts of foreign bonds, especially U.S. Treasury bills (UST). He predicts that the Bank of Japan will use the FED's FIMA repo facility to manage this situation. According to Hayes, this could potentially benefit Bitcoin and other cryptocurrencies by increasing dollar liquidity.
Hayes points out that the first banking casualty in the US financial system occurred in March 2023. The collapse of three major banks within two weeks led the Fed to provide blanket support for all USTs held on the balance sheet of any U.S. bank or U.S. branch of a foreign bank. As expected, Bitcoin rose in the following months after the bailout was announced.
The increase in the FIMA repo facility indicates the addition of dollar liquidity to global money markets. Hayes believes this is good news for Bitcoin and other cryptocurrencies. He warns readers that this is a secret way of printing money that could potentially boost the crypto market.
Hayes recalls the September-October 2023 period when the UST yield curve steepened. This caused the S&P 500 to fall 20% and the 10-year and 30-year USTs to trade at yields above 5%. In response, Janet Yellen shifted the bulk of debt issuance to short-term T-bills to unload cash deposited in the Fed's Reverse Repo Program. This move revived the markets, and as of November 1, the rise began for all risky assets, including crypto.
*This is not investment advice.
