Arthur Hayes: If the Federal Reserve expands its balance sheet to intervene in the yen and Japanese government bonds, it will benefit risk assets such as Bitcoin.

PANews reported on January 28 that BitMEX co-founder Arthur Hayes published an in-depth analysis in his latest article on the unusual global market reaction to the recent depreciation of the yen and the decline in Japanese government bond prices. He believes this indicates that the Federal Reserve and the Treasury may soon join forces to directly intervene in the yen and Japanese government bond markets through "money printing" to inject new liquidity into the global fiat currency system.

Hayes elaborated on possible intervention paths: the New York Fed would create dollar reserves, instructing primary dealers like JPMorgan Chase to sell dollars and buy yen in the foreign exchange market to support the exchange rate, and potentially invest the yen in Japanese government bonds to lower their yields. This operation would inflate the "foreign currency-denominated assets" item on the Fed's balance sheet, essentially allowing the Fed to absorb the yen's exchange rate and Japanese government bond interest rate risks through money printing. He analyzed the motivations and consequences of this move: aiming to stabilize the yen and lower Japanese government bond yields to prevent Japanese investors from massively selling off US Treasuries and repatriating their funds, thus avoiding a runaway rise in US Treasury yields and simultaneously enhancing US export competitiveness. This process would increase global dollar liquidity and potentially push up the euro and renminbi exchange rates simultaneously. Hayes pointed out that this "non-QE" balance sheet expansion would ultimately provide upward momentum for risk assets, including Bitcoin.

Regarding trading strategy, he stated that a rapid strengthening of the yen against the dollar is typically a signal of risk asset reduction. Bitcoin fell due to the yen's strength, and he will not increase his risk exposure until it is confirmed that the Federal Reserve is intervening in the yen and Japanese government bond markets by expanding its balance sheet. He has closed his positions in leveraged Bitcoin-related assets such as Strategy and Metaplanet, and said he will re-enter the market if his judgment is correct. While waiting, his fund Maelstrom continues to increase its holdings of Zcash, while maintaining its positions in other high-quality DeFi tokens. He stated that if the Federal Reserve does indeed expand its balance sheet to intervene in the foreign exchange and bond markets, it will increase its holdings of DeFi assets such as ENA, ETHFI, PENDLE, and LDO.