Former BitMEX CEO Arthur Hayes says he expects Bitcoin (BTC) to bottom out and quickly recover as he predicts the Federal Reserve will once again inject trillions of dollars to the financial system.
The crypto capitalist says that he’s keeping a close watch on how the Japanese yen (JPY) and the Euro (EUR) perform against the US dollar.
According to Hayes, the sustained strength of the US dollar against these currencies will likely compel the Fed to intervene and flip the switch on the money printing machine.
“Must watch: The JPY and EUR.
Expect an ‘intervention’ to weaken the USD if JPY > 150 and or EUR < 0.90.
‘Intervention’ means the Fed printing money.
Printing money means BTC number go up.”
In a new blog post, Hayes expounds on his thesis by highlighting how both Japan and the European Union are engaged in yield curve control (YCC). According to Hayes, YCC is the act of expanding monetary supply to purchase government bonds and reduce yields in an effort to weaken the nation’s fiat currency.
“Usually, Japan and the EU are happy to have a weak yen or euro versus the rest of the developed world. It allows their export industries to gain market share, as their goods are cheaper versus other countries.”
However, Hayes says this is time is different as surging inflation has made it challenging for citizens of Japan and the EU to afford everyday expenses.
“However, due to the food and fuel inflation experienced post-COVID and the cancelling of Russian commodity exports, their plebes are now facing the harsh downsides of having a weak currency. It is becoming more and more expensive for them to eat, move around and heat/cool their dwellings.”
Hayes says if America is determined to defeat Russia through economic sanctions, the US must find a way to weaken the dollar against the JPY and the EUR.
“At the direction of the US Treasury, the Federal Reserve Bank of New York trading desk could print USD, buy JPY/EUR, and purchase Japanese Government Bonds (JGB) or government bonds of EU members, parking them in the Exchange Stabilization Fund (ESF) on its balance sheet.”
Should the US switch the money printers back on to support its allies, Hayes says the increase in liquidity will eventually find its way to Bitcoin and the crypto markets.
“With more fiat liquidity sloshing through the system, risk assets – which include cryptocurrencies – will find their bottom and quickly begin to recover as investors discover the central bank financial asset market put has been activated.”Don't Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox
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