Bitcoin
Bitcoin will soar thanks to the bankruptcy of Japanese banks, says Arthur Hayes
BitMEX co-founder Arthur Hayes says the Japanese banking system is in trouble and the fallout will only add to the Bitcoin and crypto markets.
Just like US banks in March 2023, Hayes argued on Thursday that Japanese banks will soon need a massive bailout due to deeply underwater U.S. government bonds on their balance sheets.
“You know what this means for Bitcoin and crypto… which is why I felt it necessary to warn readers about another avenue of stealthy money printing,” he wrote. Since last year’s banking crisis and subsequent central bank bailout, he noted that the price of Bitcoin has risen by more than 200%.
The similarities between then and now are striking. Last year, Silicon Valley Bank revealed that it had recorded a $1.8 billion loss on its underwater bonds, triggering a bank run and a swift bailout from the Federal Reserve and the US Treasury. To contain banking system contagion, the Fed also promised to fully support any US Treasury bonds held in US banks.
Fast forward to this month, Japan’s fifth largest bank, Norinchukin, confirmed that intends to sell US$63 billion on US and European bonds until March 2025, as paper losses on these bonds became too large to bear.
Hayes believes this is just the tip of the iceberg, as Japanese banks cumulatively held “$850 billion in foreign bonds by 2022,” including “nearly $450 billion in U.S. bonds,” according to an IMF survey. . He said a potential bond sale of this magnitude is something U.S. Treasury Secretary Janey Yellen would not be willing to tolerate.
“This cannot be allowed as yields would increase and make funding from the federal government extremely expensive,” Hayes said. “It will require the Bank of Japan (BOJ) to purchase these bonds from the Japanese banks it supervises.”
To achieve this, Hayes suggests, the Bank of Japan will leverage its Foreign and International Monetary Authorities (FIMA) repurchase mechanism, which allows it to offer US Treasury bonds as collateral in exchange for newly printed US dollar bills.
The consequence? More money printing and fatter purses for people who own assets like Bitcoin. As such, Hayes said he will soon exit the Ethena stablecoins and enter “crypto risk” and advised readers to “buy the fucking dip.”
“This is just another pillar of the crypto bull market,” he concluded. “The supply of dollars must increase to maintain the current filthy dollar-based financial system of Pax Americana.”
Earlier this month, Hayes told followers he was time to go far in Bitcoin and shitcoins, as central banks are now starting to cut interest rates for the first time in years.
Edited by Ryan Ozawa.