Hayes Warns Traders: Ignore Warsh, Watch EUR/JPY for Bitcoin's Next Move

Arthur Hayes, chief investment officer at Maelstrom, says traders should ignore Fed Chair Kevin Warsh's hawkish comments and focus on the euro-yen exchange rate for early signs of fresh dollar liquidity. According to Hayes, mounting funding stress at French banks will eventually force the Federal Reserve to print money to keep the US repo market working.

Hayes points to EUR/JPY as his liquidity gauge, predicting it will fall to 140 or lower by next June due to Treasury Secretary Scott Bessent's efforts to weaken the euro and strengthen Asian currencies. This plan involves routing capital through the Fed's FIMA repo facility instead of letting Japan, South Korea, and Taiwan sell their dollar holdings outright.

The bigger risk, in Hayes' view, sits with French banks BNP Paribas, Credit Agricole, and Societe Generale, which together handle a fifth of US repo lending. If these banks retreat from repo lending, the New York Fed will likely lean harder on its RPM program to keep the market funded.