This measure could significantly devalue the US dollar, thereby increasing global dollar liquidity, which could benefit the crypto market, particularly Bitcoin.
Arthur Hayes speaks on the dollar-yen swap
Crypto expert Arthur Hayes explains that the proposed dollar-yen swap would work similarly to yield curve control. The American Federal Reserve would thus exchange dollars for yen with the BOJ on an unlimited basis.
“The depreciation of the US dollar will imply a sharp increase in global US dollar liquidity. This will benefit the crypto market, led by Bitcoin,” Hayes said.
The former CEO of BitMEX also notes that the BOJ and the Japanese Ministry of Finance would use these dollars to stabilize the yen by buying it, thus avoiding having to sell US Treasury securities to raise funds. This strategy will allow Japan to avoid raising interest rates, which would negatively impact financial institutions that invest heavily in Japanese Government Bonds (JGB).
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Geopolitically, a stronger yen could also affect China, Japan’s direct export competitor. If Japan strengthens the yen through this swap agreement, China could then devalue its yuan to maintain its export competitiveness.
Macroeconomic context and market reactions
This macroeconomic backdrop remains crucial for cryptocurrencies, notably Bitcoin. Indeed, recent US data have reduced the likelihood of further rate hikes. Meanwhile, China has significantly increased its stimulus measures, translating into a positive liquidity boost.
Indeed, the People’s Bank of China (PBOC) recently announced plans to issue ultra-long-term bonds and a historic bailout to stabilize the real estate sector, essentially amounting to quantitative easing ( QE) for real estate.
Growing liquidity from the United States and China is creating a favorable environment for Bitcoin. BTC spot ETF inflows increased, with $716 million in net inflows last week, reversing April’s outflows. Large institutional investors are also interested, with Millennium Management notably holding significant shares in Bitcoin ETFs.
To find out more: Buy Bitcoin or invest in a BTC ETF? We weigh the pros and cons
The correlation between the price of Bitcoin and American stocks remains a key data to monitor. Last week, BTC’s 90-day correlation with US stocks rose to 0.17, from a multi-year low of 0.01 in March. This development thus highlights the importance of active monitoring and analysis in the current market environment.
In conclusion, the Federal Reserve’s potential implementation of an unlimited swap between the dollar and the yen represents a major policy change. This could have significant effects on global liquidity, asset prices and competitive dynamics between major economies like Japan and China.
Moral of the story: It’s not tomorrow that we will no longer monitor news from the Fed.
Disclaimer
Disclaimer: In accordance with The Trust Project guidelines, BeInCrypto is committed to providing unbiased and transparent information. This article aims to provide accurate and relevant information. However, we encourage readers to verify the facts on their own and consult a professional before making any decision based on this content.
