- Arthur Hayes, former CEO of BitMEX, discusses potential growth in the cryptocurrency market due to Japanese banks’ issues with US debt.
- Norinchukin Bank’s plans to sell approximately 10 trillion yen in US and European bonds by March 2025 could impact global financial stability and cryptocurrency markets.
In a recent statement, Arthur Hayes, founder and former CEO of the cryptocurrency exchange BitMEX, highlighted a potentially significant shift in the cryptocurrency market due to the financial strategies of Japanese banks regarding US debt. Hayes’ insights come in response to news that Japan’s Norinchukin Bank plans to offload substantial holdings of US and European bonds in the fiscal year leading up to March 2025.
Understanding the Catalyst Behind the Market Shift
Hayes pointed out that the move by Norinchukin Bank is driven by significant book losses, exacerbated by falling bond prices due to rising interest rates in the US and Europe. This situation mirrors the challenges faced by the Silicon Valley Bank (SVB) in the US, which declared bankruptcy following substantial losses attributed to similar conditions.
The implications of Norinchukin’s decision extend beyond national borders, affecting global financial stability. According to a study by the International Monetary Fund, various Japanese banks held foreign debts totaling around 850 billion USD at the start of 2022, with approximately 450 billion USD of that in US debts. The potential large-scale sell-off of these US Treasury bonds could lead to increased yields, complicating funding efforts for the US government.
Potential Strategies and Crypto Market Implications
Hayes speculates that US Treasury Secretary Janet Yellen might not favor a massive sell-off of US Treasury bonds and could request the Bank of Japan to purchase these bonds from Japanese commercial banks to stabilize the market. In this scenario, the Bank of Japan would likely utilize the Foreign and International Monetary Authorities (FIMA) Repo Facility, established by the US Federal Reserve in 2020. This facility allows non-US central banks to acquire US dollars by using US Treasury securities as collateral, enabling them to manage liquidity without flooding the market with bond sales.
This backdrop sets the stage for a potential increase in the supply of US dollars, which, according to Hayes, could flow into the cryptocurrency market. He further suggested that if the G7 central banks, excluding Japan, begin to lower their high-interest rates, cryptocurrencies could enter a bull market.
Hayes emphasized the importance of closely monitoring the Federal Reserve’s future actions, as these will be crucial in shaping both the traditional financial markets and the evolving landscape of cryptocurrency investments. As we observe these financial maneuvers and their implications, the intersection of traditional banking distress and digital currency opportunities will undoubtedly remain a key area of interest for investors and analysts alike.