BitMEX co-founder Arthur Hayes says the main driver for Bitcoin prices to rise to $1 million will be the Fed as both central banks press the “easy button” to bail out Asia’s struggling currencies. Predict that the reserve system and the Bank of Japan.
Mr Hayes argued: essay On Monday, it announced that the dollar-yen exchange rate is now the “most important global economic variable” because it can influence central bankers to expand the global money supply.
But the story begins in China, he says. China stands to lose the most from the ongoing trend of a weaker yen.
“A higher CNYJPY exchange rate (weaker yen vs. stronger renminbi) will hurt China’s export competitiveness,” Hayes wrote. “If the yen continues to weaken, China will likely respond by devaluing the yuan.”
Because a country’s domestic goods are denominated in the local currency, a rapidly inflating currency is advantageous for a country that relies on exports to sustain its economy.
Unfortunately for China, Japan is its biggest competitor in the auto export market, and the weakening of the yen is making it harder for Japan to compete on price.
Hayes expects the Bank of China to pressure the United States to encourage Japan to appreciate the yen. Still, he writes, it will be difficult for the Bank of Japan (BOJ) to strengthen its currency through traditional methods such as raising interest rates.
“If the Bank of Japan raises interest rates, it will collapse faster than Sam Bankman Fried is put on the witness stand,” Hayes wrote, adding that raising rates would result in the collapse of Japanese government bonds, which the central bank itself owns 50% of. He explained that the value would plummet.
Hayes said the Bank of Japan needs to force regional banks and pension funds to buy government bonds to prevent a collapse. However, financing the purchase would require selling US bonds and US stocks, which would be against US national interests.
Hayes concluded that instead of raising interest rates, the BOJ should rely on an “easy button” — an unrestricted U.S. dollar “swap line” that would allow the BOJ and the Federal Reserve to exchange yen for dollars at a specified rate.
Since the Bank of Japan can freely print more yen, the cost of adding more dollars is virtually zero. Those dollars could be used to buy up the yen, strengthening Japan’s currency and weakening the dollar at the same time.
The final scenario would be a win for all parties. In other words, China will maintain a weaker currency than Japan, the Bank of Japan will remain solvent, and the dollar will depreciate due to the Bank of Japan’s open market purchases of yen.
Hayes argued that this is also good for cryptocurrencies, as the price of Bitcoin tends to rise along with other assets in an environment of large amounts of money printing.
“If something is done about the weaker yen, we can mathematically speculate how the flow of funds into the Bitcoin complex could drive the price up to $1 million or more,” the investor said. I intend to do so.”
Edited by Ryan Ozawa.
