Hayes says Fed yen plan boosts Bitcoin, BTC holds above $65,000

Arthur Hayes said a Fed plan to help Japan defend the yen would expand dollar liquidity and drive Bitcoin higher, with BTC near $65,200 on Monday.

"The U.S. Treasury and the Japanese government are moving together to push down the dollar-yen exchange rate," Hayes wrote in a Substack post titled "Yen-quake" published Aug. 10. "That policy shift will ultimately expand dollar liquidity and become a powerful bullish driver for Bitcoin and the broader digital-asset market."

Hayes outlined three ways to strengthen the yen: aggressive Bank of Japan rate hikes, a shift by Tokyo away from overseas assets toward domestic investment, and a plan under which Japan's Ministry of Finance would use its U.S. Treasury holdings as collateral to access the Fed's Foreign and International Monetary Authorities Repo Facility. He said the third option was the scenario most favored by Washington and Tokyo, citing recent joint FX intervention and comments by Treasury Secretary Scott Bessent about expanding the FIMA repo limit.

The mechanism would let Japan borrow dollars against its Treasury stockpile, sell them and buy yen — strengthening the yen without large-scale sales of U.S. government debt. Hayes argued this would grow the Fed's balance sheet similarly to past quantitative easing periods that coincided with Bitcoin rallies. His family office is already positioned in cryptocurrencies including Bitcoin and Ether.

The FIMA Facility and the Dollar Debate

The FIMA mechanism has drawn competing interpretations from economists. Barry Eichengreen, a University of California at Berkeley economist, wrote in a Financial Times op-ed that both the U.S. and Japanese approaches to the intervention "are an indication that the dollar's status as a reserve currency is not what it used to be." He noted the New York Fed sold euros rather than dollar-denominated assets to buy yen, avoiding the need to push more Treasury supply into a market already absorbing a $2 trillion federal deficit.

Goldman Sachs strategists took the opposite view, arguing that Japan's use of the FIMA facility "help demonstrate that no one else can come close to competing with the U.S. dollar's usefulness, network effects, and supporting infrastructure right now."

Bitcoin Holds Above $65,000 as Flows Trump Washington

Bitcoin traded near $65,200 on Monday, up 3.7% on the week, per CoinDesk data. The move caps a recovery from an early-August low near $62,000. Spot ETFs have strung together consecutive days of inflows, and a softer dollar since the weak U.S. jobs report has loosened the backdrop that pinned Bitcoin through the summer.

Bitcoin's Saturday trading range collapsed to just $350, the tightest Saturday spread since Nov. 25, 2023, according to TradingView data. The Senate failed to pass the CLARITY Act before leaving for its August recess on Friday, mustering 51 of the 60 votes needed, but the market rose anyway — evidence that flows, not headlines, are driving price action.

Strategy, the largest corporate Bitcoin holder, sold 1,690 BTC for $108.6 million last week and used proceeds to repurchase preferred shares, reducing its holdings to 840,447 BTC. The company's USD reserve reached $4.65 billion.

The Fed has yet to confirm expanding the FIMA lending cap. If it does, Hayes said, the resulting dollar liquidity would be a powerful tailwind for Bitcoin and other risk assets. His family office is already positioned in Bitcoin and Ether.

This article is for informational purposes only and does not constitute investment advice.