Arthur Hayes: Liquidity Boost from Japan Could Trigger Bitcoin Bull Market

• Arthur Hayes, the founder of BitMEX, unveils key factors that could trigger a bullish trend in the cryptocurrency market.
• He highlights the influence of economic developments in the United States and Japan.
• Hayes points out that liquidity injections could propel a rise in risk assets, including cryptocurrencies.

Discover critical factors that could drive the next bull run in the cryptocurrency market, with insights from BitMEX founder Arthur Hayes.

US and Japanese Economic Developments

In a blog post dated June 22, Arthur Hayes elaborates on how current economic scenarios in the US and Japan could boost the cryptocurrency market. According to Hayes, Japanese banks are anticipated to offload substantial amounts of foreign bonds, particularly US Treasuries (USTs). To manage this, the Bank of Japan is expected to utilize the Federal Reserve’s FIMA repo facility. This influx of liquidity is likely to benefit risk assets, including digital currencies.

Historical Context and Market Reactions

In the latter half of 2023, UST yields soared, prompting significant market reactions. Yields on 10-year and 30-year USTs climbed above 5%, causing a notable 20% drop in the S&P 500. In response, Treasury Secretary Janet Yellen shifted borrowing strategies towards short-term Treasury bills and unleashed cash reserves held in the Fed’s Reverse Repo Program, invigorating the financial markets. As of November 1, this liquidity boost led to a rapid ascent in riskier assets, including cryptocurrencies.

The Impact of US Election Year

The upcoming US elections present a unique market influence. Faced with the possibility of losing, the current administration, under the guidance of Janet Yellen, aims to prevent financial disasters by maintaining low yields. Directing Japanese banks to utilize the FIMA repo facility instead of public markets for selling USTs could play a pivotal role in sustaining market stability. This could ultimately supply the crypto market with the necessary dollar liquidity for another bullish wave.

Concluding Insights

Arthur Hayes summarizes the potential market dynamics with his assertion “Shikata Ga Nai”, suggesting that market downturns should be viewed as buying opportunities. In essence, the dollar-based financial system requires a continual supply of dollars. Japanese financial actions could provide the vital liquidity to not only support traditional markets but also to propel cryptocurrencies into a new bullish phase.