Markets
How a falling yen could fuel a cryptocurrency market boom, according to Arthur Hayes
- A weakening of the Japanese yen could fuel currency wars.
- US intervention could lead to an injection of liquidity, fueling the cryptocurrency market rally.
Arthur Hayes, founder of BitMEX exchange and CIO of crypto fund Maelstrom, said the weakening of the Japanese yen (JPY) could induce liquidity and stimulate Bitcoin [BTC] and the rest of the cryptocurrency market.
In his latest blog titled ‘Easy button‘, the manager observed that,
“I think a USD/JPY surge towards 200 is enough to bring out the Chemical Brothers and “Push the Button.”
“Chemical Brothers” refers to the United States and Japan, while “Push the Button” means printing money or “liquidity injection.”
At the time of writing, the USDJPY pair is trading at $156. The USD has strengthened against the Yen in 2024, with a year-to-date performance of 10%.
From a yen perspective, the Japanese currency has depreciated massively in recent months.
How a depreciating yen could strengthen cryptocurrencies
According to Hayes, the collapse in the value of the yen could provoke currency wars between Japan and China, forcing the United States to intervene.
Looking ahead, a falling yen means it will be cheaper for Japan to export more bulk goods to the rest of the world. Such a move would make its exports very competitive with those of China.
In retaliation, China could devalue its yuan (CNY) by printing more money to maintain its export advantage and stabilize the CNYUSD at its desired level.
According to Hayes, the United States could intervene and strengthen the yen by devaluing the dollar and increasing its supply.
‘To weaken the dollar, its supply must increase. Let’s imagine the Japanese need $1 trillion in firepower to strengthen the yen from 156 to 100 overnight.’
The knock-on effect is an increase in the price of dollar-based assets due to the increase in USD supply. Overall, with a rise in the yuan (CNY), a “cryptocurrency boom” could occur.
“Cryptocurrencies are growing as more liquidity in dollars and yuan circulates in the system”
Furthermore, according to Hayes, the aforementioned currency devaluation will be ripe for Bitcoin’s recovery because it is the best performing asset in the face of global fiat devaluation.
That said, this is not the first time the executive has predicted favorable macro conditions for the cryptocurrency rally.
Hayes earlier stated that the US election could increase US liquidity, which could lead to increased risk on assets, including BTC.
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