Japanese Banks in Trouble: Bitcoin Set to Soar, Says Arthur Hayes
BitMEX co-founder Arthur Hayes believes that the struggles of the Japanese banking system will boost the Bitcoin and crypto markets significantly.
Much like the U.S. banking crisis in March 2023, Hayes argued on Thursday that Japanese banks will soon need a massive bailout due to the deeply underwater U.S. government bonds on their balance sheet.
Why It Matters for Bitcoin
“Y’all know what that means for Bitcoin and crypto … which is why I thought it necessary to alert readers about another avenue of stealth money printing,” Hayes wrote. Since last year’s banking crisis and its subsequent central bank bailout, he noted that Bitcoin’s price has risen over 200%.
The Past Repeats
The similarities between then and now are striking. Last year, Silicon Valley Bank revealed a $1.8 billion loss on its underwater bonds, sparking a bank run and a quick bailout from both the Federal Reserve and the U.S. Treasury. To stem the contagion, the Fed also promised to fully backstop any U.S. Treasuries held at U.S. banks.
Current Situation in Japan
Fast forward to this month, and Japan’s fifth largest bank, Norinchukin, has confirmed that it intends to sell $63 billion in U.S. and European bonds by March 2025, since its paper losses on those bonds have gotten too large to bear.
The Bigger Problem
Hayes believes that’s just the tip of the iceberg, as Japanese banks cumulatively held $850 billion in foreign bonds going into 2022, including almost $450 billion in U.S. bonds, according to an IMF survey. He said a potential bond sale of this magnitude is something that U.S. Treasury Secretary Janet Yellen would not tolerate.
“That cannot be allowed as yields would spike higher and make funding the federal government extremely expensive,” Hayes said. “She will demand that the Bank of Japan (BOJ) purchase these bonds from Japanese banks it supervises.”
The Bigger Picture
To accomplish this, Hayes suggests, the BOJ will leverage its Foreign and International Monetary Authorities (FIMA) repo facility, which allows it to pledge U.S. Treasuries as collateral in return for newly printed U.S. dollar bills.
Consequence: Bullish Bitcoin
The consequence? More money printing, and fatter bags for people who hold assets like Bitcoin. As such, Hayes said he’ll soon be rotating out of Ethena stablecoins and into “crypto risk,” and advised readers to “buy the dip.”
“This is just another pillar of the crypto bull market,” he concluded. “The supply of dollars must increase to maintain the current Pax Americana dollar-based financial system.”
A Call to Action
Earlier this month, Hayes told followers that it was time to go long on Bitcoin and other cryptocurrencies, as central banks are now beginning to cut interest rates for the first time in years.
