Arthur Hayes Predicts Bitcoin Rally as Fed Signals Liquidity Boost

Arthur Hayes says covert Fed money to support the yen could boost Bitcoin and crypto prices.

Former BitMEX CEO Arthur Hayes suggested that the US Federal Reserve may quickly expand its balance sheet to support the Japanese yen and government bonds.

He asserted that this printing of cryptocurrency will raise the price of Bitcoin (BTC) and other cryptocurrencies.

Hayes Links Yen Stress, Fed Action, and Crypto Markets

In a January 28 letter titled “Woomph,” Hayes said the Fed has the legal authority to intervene in foreign exchange and bond markets, which could address economic pressures in Japan that threaten the stability of the US Treasury. According to him, what this move in crypto markets means is simple:

“Bitcoin and the quality of shitcoins will automatically go in fiat terms as the value of paper money goes up.”

Hayes created a scenario where the New York Federal Reserve, in coordination with the US Treasury, created new dollar reserves to buy the Japanese yen. Those yen would then be used to buy Japanese Government Bonds (JGBs). The aim would have been to strengthen the yen and lower JGB yields, preventing Japanese investors from selling US Treasuries to recoup their funds as the massive sale could raise US borrowing costs.

He pointed to a concrete event as a possible proof: the “level check” by the New York Fed on the exchange rates of USD / JPY on January 23. Analysts of QCP Capital noted on January 26 that this action showed a legitimate sensitivity to the weak yen and made the sellers safe. Hayes interpreted these actions as the Fed “deliberately and publicly communicating its intentions.”

The legal mechanism, according to the crypto veteran, involves the Exchange Rate Stabilization Fund and the Fed’s authority to hold foreign currency assets. He wrote,

“Buffalo Bill Bessent can intervene in currency markets … Treasury contacts NY Fed to help manipulate markets.”

In his view, confirmation will be seen in the weekly growth of “assets collected in Foreign Currency” on the Fed’s balance sheet.

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Market Skepticism Remains Despite Liquidity Thesis

Hayes’ prediction runs counter to the prevailing tone of caution in crypto markets. Bitcoin has struggled to hold above $90,000, trading around $89,000 at the time of this writing after a gradual dip.

Some experts are also looking to Japan for great guidance. Last week, market watcher Michaël van de Poppe suggested that the Bank of Japan needed to intervene in bond markets, which would allow riskier assets to continue to flow.

Meanwhile, Hayes admitted that his view is currently a theory, saying, “What I’m going to present is the view that real money flows… He made his trade dependent on looking at an increase in the Fed’s balance sheet. His view is that such an intervention would create dollar liquidity around the world, weaken the dollar index and provide fuel for rising asset prices.”

For crypto investors, the BitMEX founder’s analysis points to upcoming reports on the Fed’s balance sheet as key data points to judge the next big market move.