Arthur Hayes Says Fed Move to Support Japan Bonds Could Spark Bitcoin Rally

Bitcoin could finally break out of its prolonged sideways trading range if the U.S. Federal Reserve steps in to support Japan’s struggling bond market, according to BitMEX founder Arthur Hayes. Hayes outlined a theory that growing stress in Japan’s financial system may force coordinated intervention by global central banks, potentially triggering fresh liquidity that would benefit risk assets like Bitcoin.

Notably, Japan is facing what Hayes describes as a dual crisis. The yen has been weakening while yields on Japanese government bonds (JGBs) are rising at the same time, a rare and troubling combination that signals declining confidence in the market.

Moreover, higher domestic yields could also encourage Japanese investors to sell U.S. Treasurys and move funds back home, creating ripple effects for U.S. markets. Hayes argues that this situation increases the likelihood of central bank intervention.

“Will a meltdown of the yen and JGB markets cause some sort of money printing by the BOJ (Bank of Japan) or the Fed? The answer is yes,” he said.

He added that Japan’s financial stress matters directly for Bitcoin’s price action.

“This discussion of Japanese financial markets is important because for Bitcoin to exit its sideways funk, it needs a healthy dose of money printing,” he asserted.

Fed Intervention Could Expand Liquidity

Hayes believes the Federal Reserve has a specific mechanism it could use to stabilize Japan’s markets. Under his scenario, the Fed would create dollar reserves at major banks such as JPMorgan, sell dollars in exchange for yen to strengthen the Japanese currency, and then use those yen to buy JGBs, pushing bond yields lower.

Such an operation would expand the Fed’s balance sheet under its “Foreign Currency Denominated Assets” category, effectively injecting liquidity into the global system. Interestingly, Hayes described the move bluntly, saying,

“This Fed intervention is just what the filthy fiat system needs to limp along a little longer.”

Hayes says he is closely monitoring the Fed’s weekly H.4.1 balance sheet report for signs that this process has begun. Until then, he is holding back on additional risk.

“Bitcoin fell as the yen strengthened against the dollar. I will not increase risk before I confirm the Fed is printing money to intervene in the yen and JGB markets,” he said.

Nonetheless, the broader currency backdrop adds context to his thesis. The U.S. Dollar Index (DXY) fell to 95.6 on Tuesday, its lowest level since January 2022, even as U.S. President Donald Trump insisted the dollar was “doing great.” Hayes sees these tensions as early signs of the liquidity conditions Bitcoin may need for its next major move.

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