According to BitMEX founder Arthur Hayes, Bitcoin’s stagnant trend could be broken if the US central bank intervenes in the struggling Japanese bond market by printing money.

Hayes put forth a theory on Wednesday suggesting that the Federal Reserve may be printing money to manipulate the weakening yen and rising Japanese government bond yields.

Japan is currently facing a dual crisis as the weakening yen and rising bond yields indicate a potential loss of market confidence. This could also affect the US as Japanese investors may choose to sell US Treasurys and invest in higher-yielding JGBs instead.

Hayes believes that if the yen and JGB markets continue to decline, the Bank of Japan or the Fed may resort to printing money. This would have a significant impact on the crypto market and government regulations surrounding it.

The Fed’s Intervention Strategy May Serve as a Liquidity Trigger

According to Hayes, the Federal Reserve may intervene in the market by creating reserves with banks such as JPMorgan, exchanging dollars for yen, which would strengthen the yen, and then using the yen to purchase Japanese government bonds, resulting in lower bond yields.

This action would expand the Fed’s balance sheet through its “Foreign Currency Denominated Assets” category, as stated by Hayes.

Hayes seems to be backing up his theory by keeping a close eye on the Fed’s weekly H.4.1 report, which displays its balance sheet.

“Bitcoin saw a decline as the yen gained strength against the dollar. I will not take on additional risk until I have confirmation that the Fed is printing money to intervene in the yen and JGB markets,” he declared.

China and Japan’s Crypto Regulations and the Impact on the US Dollar

The US Dollar Index (DXY) hit a four-year low at 95.6 on Tuesday, marking a 10% decline in the past year, according to TradingView.

Despite this, US President Donald Trump praised the dollar’s performance during a speech in Iowa, claiming it was “doing great”.

However, Trump’s remarks come amidst ongoing tension with China and Japan over their crypto policies. In the past, Trump has criticized these countries for devaluing their currencies, particularly the yen and yuan, to gain an advantage in trade.

As the debate over crypto regulation continues, it remains to be seen how these global economic factors will impact the future of cryptocurrencies and their role in government and banking systems.

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