The weakening Japanese yen could potentially lead to actions that drive up the price of bitcoin and other cryptocurrencies, according to former BitMEX CEO Arthur Hayes.
His central argument revolves around the fact the Japanese yen has been rapidly weakening against the US dollar due to the large interest rate differential between the two currencies. This hurts Japan’s export competitiveness against China.
China may threaten to devalue the yuan if Japan doesn’t strengthen the yen, as a weaker yen makes Japanese exports more competitive against Chinese exports.
To avoid a yuan devaluation that would hurt US manufacturing, the US could pressure Japan to strengthen the yen by having the Federal Reserve engage in unlimited dollar-yen currency swaps with the Bank of Japan, Hayes explained in his latest blog post.
These massive Fed dollar swaps would increase the supply of dollars globally, thereby weakening the dollar but allowing China to stimulate its economy without devaluing the yuan.
As such, the weakening greenback would drive up the prices of dollar-denominated assets like US stocks and cryptocurrencies like BTC.
Hayes further went on to argue that this “easy button” solution of currency swaps avoids more painful actions like the Bank of Japan raising rates or the Fed enacting yield curve control overtly.
He also sees the weakening yen pressures coming to a head around the US election, motivating policymakers to act. Such a situation would potentially be very bullish for bitcoin as a hedge against the rising global liquidity.
The primary cryptocurrency has been on a roll this year, mostly driven by ETF hype and demand. It shot up to $72,000 yesterday amid hopes about the US SEC approving Ethereum ETFs.
However, numerous experts suggested that the real rally will start once global superpowers like the US start reducing the interest rates.
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