Hayes: Fed Yen Intervention Could Fuel Bitcoin Rally

Arthur Hayes constructs a specific scenario to explain his prediction. He suggests the New York Federal Reserve, coordinating with the U.S. Treasury, would utilize its legal authority to create new dollar reserves. These dollars would be used to purchase Japanese yen on the foreign exchange market. Subsequently, those acquired yen would be deployed to buy Japanese Government Bonds (JGBs). The dual objectives of this operation would be to strengthen the weakening yen and to lower yields on JGBs.

The rationale, according to Hayes, is to address a significant threat to U.S. financial stability. If the yen remains weak and JGB yields rise, it could pressure Japanese financial institutions—major holders of U.S. Treasury debt—to sell those Treasuries to repatriate capital back to Japan. A mass sale could spike U.S. borrowing costs, a scenario the Fed is keen to avoid. Hayes points to the legal framework enabling this, involving the Treasury’s Exchange Stabilization Fund and the Fed’s authority to hold foreign currency assets, stating, “Buffalo Bill Bessent can intervene in the currency markets… The Treasury taps the NY Fed to help manipulate the markets.”

Hayes points to concrete market events as potential evidence that his theory is moving from speculation toward reality. He highlights a “rate check” conducted by the New York Fed on USD/JPY exchange rates on January 23. Analysts at QCP Capital noted this action hinted at official sensitivity to a weakening yen and put traders on the defensive. Hayes interprets such moves as the Fed “deliberately and publicly telegraphing its intentions.”

For Hayes, the ultimate confirmation would be visible in the hard data. He instructs market watchers to monitor the weekly growth of the “Foreign Currency Denominated Assets” line on the Fed’s balance sheet. An expansion here would signal the active intervention he predicts. He has made his own trading outlook contingent on observing this data, framing upcoming Fed balance sheet reports as critical for judging the crypto market’s next major directional move. The implied result of such intervention, he argues, is the creation of fresh dollar liquidity globally, which would weaken the U.S. Dollar Index (DXY) and provide fuel for broad asset price inflation.

Despite the compelling narrative, Hayes’ prediction arrives amidst a prevailing tone of caution in crypto markets. At the time of his essay, Bitcoin was struggling to hold above the $90,000 level, trading around $89,000 after brief dips lower. This price action underscores the skepticism facing the theory. Hayes himself acknowledges the speculative nature of his idea, stating, “What I will present is a theory which the actual flow of money… doesn’t support yet.”

Hayes is not alone in looking to Japan for macro direction. Other analysts, like market watcher Michaël van de Poppe, have also suggested that intervention from the Japanese central bank in its bond markets is necessary to allow risk-on assets like cryptocurrencies to continue their upward momentum. This convergence of focus highlights how interconnected global monetary policy has become for digital asset valuations. The coming weeks, particularly the data on the Fed’s balance sheet, will test whether Hayes’ theory of covert liquidity expansion is prescient or merely provocative.