Could Japan’s Banking Crisis Trigger Another Bitcoin Rally? Arthur Hayes Think So

Arthur Hayes, the co-founder of BitMEX, recently suggested that Japan’s banking system is on the brink of a significant crisis, potentially leading to another surge in Bitcoin (BTC) and cryptocurrency markets. He argues that Japanese banks, burdened by large amounts of underwater U.S. government bonds, will require a substantial bailout soon, similar to the situation faced by U.S. banks in March 2023.

Arthur Hayes Predicts Bitcoin Surge Amid Japan Crisis

Arthur Hayes has warned that Japanese banks are dealing with severe financial issues due to the massive losses on their U.S. government bonds. He likened this situation to the crisis experienced by U.S. banks last year when Silicon Valley Bank disclosed a $1.8 billion loss on its underwater bonds, prompting a quick intervention by the Federal Reserve and the U.S. Treasury. To prevent a banking system collapse, the Federal Reserve promised to backstop any U.S. Treasuries held at U.S. banks fully.

In a recent development, Japan’s fifth-largest bank, Norinchukin, announced its plan to sell $63 billion in U.S. and European bonds by March 2025 because the paper losses on these bonds have become unsustainable. Hayes believes this is only a small part of the problem, noting that Japanese banks collectively held $850 billion in foreign bonds at the start of 2022, including nearly $450 billion in U.S. bonds, according to an IMF survey.

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Bond Sale Could Boost Bitcoin Prices

Arthur Hayes suggests that a bond sale of this magnitude would be unacceptable to U.S. Treasury Secretary Janet Yellen, as it would spike bond yields, making it extremely expensive to fund the federal government. He anticipates that Yellen will demand the Bank of Japan (BOJ) purchase these bonds from Japanese banks under its supervision. To facilitate this, Hayes proposes that the BOJ utilize its Foreign and International Monetary Authorities (FIMA) repo facility, allowing it to use U.S. Treasuries as collateral in exchange for newly printed U.S. dollars.

According to Hayes, this situation will result in more money printing, which is beneficial for those holding assets like Bitcoin. Consequently, he plans to shift from Ethena stablecoins to “crypto risk” and has advised others to “buy the dip.”  Arthur Hayes views this as a significant factor driving the current crypto bull market, asserting that the supply of dollars must increase to sustain the current dollar-based financial system.

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