EUR/JPY Drop Triggers Liquidity Chain: Crypto Market Expected to Benefit

Arthur Hayes, co-founder of BitMEX, is keeping a close eye on the EUR/JPY exchange rate as his current 'North Star' in macro trading. He predicts that it will drop from around 185 to 140 or lower by June next year.

Hayes believes U.S. Treasury Secretary Scott Bessent is pushing for a weaker dollar against the yen while guiding funds back to Japan and other Asian countries through policy. This will put pressure on European assets, particularly France's high fiscal deficit and increasing government debt.

France's reliance on foreign capital makes it vulnerable in the Eurozone, with French banks and government bond markets likely facing continued outflow pressure. Japanese companies are being urged to repatriate their overseas funds, which will strengthen the yen and may lead investors to reduce their holdings of European assets.

Hayes predicts that this series of changes will ultimately form a liquidity chain of 'tightening first, then easing.' A drop in EUR/JPY will become a leading indicator of increased risk for French banks and the impending expansion of dollar liquidity. The Fed's increase in dollar supply through RMP and FIMA repo mechanisms may drive global fiat liquidity growth.

Hayes expects the crypto market to be one of the fastest beneficiaries of this liquidity expansion, advising investors to pay attention to EUR/JPY put options while maintaining a structural long position in Bitcoin. He also reiterated his price targets for Ethereum (ETH) at $10,000 and other assets by the end of 2026.