Bitcoin and the Weakening Yen: The Impact of Japan’s Currency Depreciation on Crypto Markets

According to former BitMEX CEO Arthur Hayes, the weakening Japanese yen could have a significant impact on the price of bitcoin and other cryptocurrencies. He argues that Japan’s rapid depreciation against the US dollar is due to the interest rate differential between the two currencies, which negatively affects Japan’s export competitiveness against China. If Japan doesn’t strengthen the yen, China might threaten to devalue the yuan, making Japanese exports more competitive against Chinese exports.

To prevent a yuan devaluation that could harm US manufacturing, Hayes suggests that the US could pressure Japan to strengthen the yen by engaging in unlimited dollar-yen currency swaps with the Bank of Japan. This would increase the global supply of dollars, weaken the dollar, and allow China to stimulate its economy without devaluing the yuan. As a result, the weakening dollar could drive up the prices of dollar-denominated assets like US stocks and cryptocurrencies such as bitcoin.

Hayes believes that this strategy of currency swaps is an “easy button” solution that avoids more drastic measures like raising interest rates or enacting yield curve control. He predicts that pressure on the yen will intensify around the US election, prompting policymakers to take action. This scenario could potentially be bullish for bitcoin as a hedge against rising global liquidity.

Bitcoin has seen significant growth this year, fueled by ETF excitement and demand. The cryptocurrency reached $72,000 recently on hopes of the US SEC approving Ethereum ETFs. However, many experts believe that the real rally will begin when major global powers like the US start reducing interest rates.