FIMA Facility Rescue May Fuel Bitcoin, Ether Gains

Arthur Hayes, co-founder of BitMEX, believes that Japan's use of the Federal Reserve's FIMA repo facility to rescue its weakening yen could have a positive impact on Bitcoin and Ether.

Hayes argues that the FIMA mechanism allows Japan to avoid selling Treasuries outright while still generating dollars to buy yen. This process involves the Ministry of Finance repoing its Treasury holdings at the Fed, receiving a dollar loan, and then selling those dollars in forex markets to purchase yen directly.

The combined total of Japan's government and GPIF's Treasuries eligible for this process is approximately $1.373 trillion, Hayes estimates. This figure is comparable to the roughly $4 trillion balance sheet expansion by the Fed during the pandemic period, according to Hayes.

Hayes points out that there is a historical correlation between the Fed's balance sheet growth and Bitcoin's price trajectory. He also notes that removing the FIMA facility's $60 billion counterparty cap would require action from the Fed's Foreign Currency Subcommittee, which includes Fed Chair Warsh and others.