BitMEX founder Arthur Hayes wrote in an article today that in order to curb the continuous depreciation of the Japanese yen, the Federal Reserve may reach an unlimited agreement with the Bank of Japan to swap dollars for yen. This will lead to a significant depreciation of the US dollar and trigger a new round of growth in the cryptocurrency market, with Bitcoin prices potentially reaching $1 million.
Arthur Hayes pointed out that the exchange rate between the US dollar and the Japanese yen is one of the most important global economic variables, and the complex currency policy interactions between Japan, the United States, and China, as well as their profound impact on the global economy, affect the trend of the cryptocurrency market.
When it comes to the current situation of the widening interest rate differential between the US and Japan and the continuous depreciation of the Japanese yen, Arthur Hayes pointed out that the Bank of Japan will not be willing to raise interest rates because it is the largest holder of Japanese government bonds, and when interest rates rise, bond prices will fall, which means that the Bank of Japan will bear the greatest losses.
However, if the Bank of Japan does not raise interest rates and the Federal Reserve does not lower interest rates, the interest rate differential between the US dollar and the Japanese yen will still exist. In the case of higher US dollar yields than the yen, investors will continue to sell the yen, leading to further depreciation of the yen.
Furthermore, Arthur Hayes mentioned that the depreciation of the yen will affect China’s export competitiveness, forcing China to respond by devaluing the renminbi. This may trigger a currency war between China and the United States. If the United States does not intervene in the depreciation of the yen, China may take more aggressive measures, such as selling US bonds, buying gold, or even announcing a peg between the renminbi and gold, causing turmoil in the global financial system.
One way to weaken the US dollar and allow China to stimulate its economy without selling US Treasury bonds is through unlimited currency swaps between the US dollar and the Japanese yen. This is equivalent to implementing Yield Curve Control (YCC) implicitly, which will result in excessive depreciation of the US dollar.
Arthur Hayes explained that both the Federal Reserve and the Bank of Japan can print dollars and yen at no cost because they have their own domestic printing machines. If we assume that the Federal Reserve exchanges $1 trillion for an equivalent amount of yen:
Bitcoin may reach $1 million?
In Arthur Hayes’s view, the depreciation of the US dollar represents a sharp increase in global US dollar liquidity, which will benefit the cryptocurrency market. If the Federal Reserve and the Bank of Japan do implement a simple and crude currency exchange policy, it will trigger a new round of growth in the cryptocurrency market.
Arthur Hayes suggested that cryptocurrency traders closely monitor future changes in the exchange rate between the US dollar and the Japanese yen and appropriately increase their cryptocurrency allocations. He emphasized that when the market discovers that the US and Japan are undertaking large-scale currency swaps and the scale of the swaps continues to expand, it is likely that the cryptocurrency bull market is imminent, and Bitcoin may reach $1 million.