Yen Rescue Could Send Bitcoin and Gold Soaring with Increased Dollar Liquidity

BitMEX co-founder Arthur Hayes thinks that a Federal Reserve-backed rescue of the Japanese yen could be a catalyst for Bitcoin, gold, and Ether to rise.

Japan is facing two main problems: its currency is weakening and government bond yields are increasing. If Japan raises interest rates too much to support the yen, it could trigger a major market shock by unwinding the global yen carry trade.

Instead of selling its U.S. Treasury bonds, Japan can use them as collateral to borrow newly created U.S. dollars from the Fed through the Foreign and International Monetary Authorities (FIMA) Repo Facility.

This process is similar to quantitative easing (QE) and adds more liquidity to global markets, Hayes says. With more U.S. dollar liquidity, investors often buy assets like Bitcoin and Ether.