Arthur Hayes: Japan Yen Fix Could Fuel Bitcoin and Ethereum Rally

Hayes argues the Fed's existing $60B FIMA limit is too small to support intervention on the scale Japan may require.

Arthur Hayes published a new essay this week arguing that the US Treasury and Japan’s Ministry of Finance have settled on a single method to strengthen the yen: running newly printed dollars through the Federal Reserve’s currency swap facility.

Hayes says the mechanics point to a wave of dollar liquidity hitting the global markets, and he’s positioning Bitcoin (BTC), gold, and Ethereum (ETH) to catch the bulk of it.

The Plan, and Why Hayes Says It’s the Only One That Works

Hayes lays out three ways Japan could push the yen higher. The Bank of Japan could raise rates aggressively, but doing so would deepen losses on its own mountain of low-yield bonds and raise Tokyo’s debt service costs.

Japan could also lean on institutions like the pension fund GPIF to sell foreign assets and buy domestic ones, but that would turn one of the largest holders of US Treasuries into a seller, something Washington can’t stomach given how dependent American markets are on that demand.

The third option, which Hayes calls the preferred one, works differently. The MOF would repo its Treasury holdings to the Fed through the FIMA facility in exchange for dollars, then sell those dollars to buy yen in the open market.

The catch now is size. The facility caps each counterparty’s outstanding loan at $60 billion, and a recent joint intervention burned through more than $100 billion while only pushing the yen up 5% for a few trading days. Removing that cap and adding counterparties like GPIF would change the math. Between Japan’s government and GPIF, Hayes counts $1.373 trillion in Treasury holdings that could theoretically flow through the facility, a number he compares to the roughly $4 trillion the Fed printed during COVID.

Hayes frames the outcome bluntly. “The more they print, the higher Bitcoin goes,” he wrote, adding that he’d rather see the liquidity land in Bitcoin and gold than in AI infrastructure spending he considers wasteful.

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Among altcoins, he singled out ETH as undervalued relative to other majors and named Ethena’s ENA token as a smaller bet he thinks could still multiply several times over.

The Yen Backdrop Driving the Bet

Hayes’s essay follows weeks of analysts flagging the same currency pressure from different angles. After the Bank of Japan held rates at 1% in late July, EGRAG CRYPTO warned that Japan is approaching one of the most dangerous monetary crossroads in modern financial history, cautioning that unwinding yen-funded trades could force selling across stocks, bonds, and Bitcoin alike.

That came weeks after the yen fell to its weakest level against the dollar since 1986, a move Spot On Chain’s Hupzy said would keep supporting crypto as long as the macro tailwind from currency depreciation persists until the rate differential narrows.