Arthur Hayes: Fed Intervention for Yen Can Boost Bitcoin and Ether

BitMEX co-founder Arthur Hayes outlines in a new essay a scenario in which the US Federal Reserve indirectly supports the Japanese yen through a little-known emergency facility. According to Hayes, that arrangement would significantly expand the dollar supply in the system, which ultimately is good news for Bitcoin, Ether and gold. Bitcoin is trading at $64K at the time of writing, down 1.9% over the past 24 hours.

Bitcoin is available at OKX and Bybit.

In short:

• Hayes sees the Fed’s FIMA repo facility as the most likely instrument to strengthen the yen, without requiring the Bank of Japan to intervene with interest rate hikes.
• If the current limit of $60 billion per counterparty is raised, Japan could pledge up to $1.37 trillion in US Treasuries as collateral.
• The additional dollar liquidity this generates is seen by Hayes as a positive factor for Bitcoin, Ether and gold.

FIMA repo as emergency valve for Japan

In his essay on Substack, Hayes explains that the most obvious route to strengthening the yen does not run through aggressive interest rate hikes by the Bank of Japan or large-scale sales of US Treasuries. Instead, he points to the Fed’s FIMA repo facility, a mechanism that allows foreign central banks and governments to raise dollars temporarily by using US Treasuries as collateral.

Through the government and the large pension fund GPIF, Japan holds some $1.37 trillion in US Treasuries that could serve as collateral. The problem is that a limit of $60 billion per counterparty currently applies. If that ceiling is raised, it opens the door to a significant expansion of the Fed’s balance sheet. Hayes argues that this amounts to indirect money creation, without the Fed having to formally announce a purchase programme. Japan has long been under pressure due to record losses on bonds and high debts in equities.

Personal experience with yen and ETFs

Hayes illustrates his argument with an anecdote from his own trading past. He describes how, as a market maker for MSCI Japan ETFs in dollars, he struggled with the rapid movements of the yen. Because he could not hedge his currency risk quickly enough, he decided to simply accept the exposure on the long dollar side while his book increasingly filled with ETFs that traders were offloading.

He places that experience alongside the broader dynamic: when Japan faces a crisis situation, domestic institutions such as insurers quickly repatriate capital from abroad. That means selling foreign equities and bonds, largely in the US, and a flow of yen back that strengthens the currency. In that light, Hayes views the current situation as a repetition of patterns he previously experienced up close.

Consequences for Bitcoin and other assets

The core of Hayes’s argument is that the additional dollar liquidity flowing into the system via the FIMA repo has historically been favourable for risky and scarce assets. He explicitly names Bitcoin, Ether and gold as the main beneficiaries. If the Fed expands its balance sheet, even if technically via a repo facility rather than direct purchases, that behaves like new liquidity in the eyes of markets.

That Hayes is thinking in this direction fits his broader view that macroeconomic tensions between major economies are ultimately always resolved through money creation. For investors in Bitcoin and Ether, an expansion of the FIMA limit could therefore be a signal to be extra alert to price movements. Whether the Fed will actually take that step remains uncertain, but Hayes considers it the most logical way out of the current tensions.