Arthur Hayes says Bitcoin’s next leg higher is less about crypto-specific 
catalysts and more about whether US policymakers are forced to respond to 
mounting stress in Japan’s currency and government bond markets. stress he 
argues will ultimately translate into fresh dollar liquidity. In his latest 
essay, “Woomph,” published Wednesday, Hayes frames the recent yen weakness and 
a selloff in long-dated Japanese government bonds (JGBs) as the kind of 
systemic “alarm sound” that precedes official intervention. “The financial 
markets went woomph as the yen weakened and JGB prices collapsed,” he wrote. 
“Therefore, analyzing the fragility that the yen and JGB injects into global 
markets at this juncture is extremely important. Will a meltdown of the yen 
and JGB markets cause some sort of money printing by the BOJ or the Fed? The 
answer is yes, and this essay will explain the mechanics of the said 
intervention that was foreshadowed last Friday.” Related Reading: Bitcoin 
Social Interest Fades As Retail Chases Gold, Silver Hype Hayes lays out a 
step-by-step scenario in which the New York Fed expands bank reserves, sells 
dollars for yen, and then deploys that yen into JGB purchases, effectively 
stabilizing both USD/JPY and Japan’s long-end yields while warehousing FX and 
duration risk on the Fed’s balance sheet. In his telling, the signature will 
be visible in a specific line item: “Foreign Currency Denominated Assets” on 
the Fed’s weekly H.4.1 balance sheet release. If that figure grows rapidly, 
Hayes argues it would suggest the Fed has begun accumulating foreign-currency 
assets, potentially JGBs, consistent with the intervention pathway he 
describes. The policy motive, he adds, is not charity. Hayes points to Japan’s 
large stock of foreign assets and its role as a major holder of US Treasuries, 
arguing that rising JGB yields could pull Japanese capital home and pressure 
US borrowing costs. Japanese policy debates over yen weakness and the BOJ’s 
tightening path, and the BOJ itself held its policy rate at 0.75% on January 
23. Hayes centers on what he calls a deliberately telegraphed signal: market 
chatter that US officials had “checked prices” with Wall Street dealers, 
language traders often interpret as a precursor to FX intervention. The 
Financial Times reported that a US “rate check” helped drive a sharp yen move 
and stoked speculation about coordinated action. Related Reading: Expert Who 
Nailed The Bitcoin Top Now Says Buy At These Levels He also suggests the BOJ’s 
decision to stand pat, despite what he characterizes as a market demanding a 
stronger defense of the yen and the bond market, increased the odds of US 
help. Japan’s political backdrop matters here too: Sanae Takaichi dissolved 
parliament and set a snap election for February 8, a move widely covered in 
international media in recent days. Why Hayes Ties It Back To Bitcoin For 
Hayes, the Japan stress story is ultimately a liquidity story and he argues 
Bitcoin remains tethered to the direction of the Fed’s balance sheet. “This 
discussion of Japanese financial markets is important because for Bitcoin to 
exit its sideways funk it needs a healthy dose of money printing,” he wrote. 
“What I will present is a theory which the actual flow of money through the 
corroded veins of the global monetary system doesn’t support yet. As time 
progresses, I will monitor the changes in certain line items on the Fed’s 
balance sheet in order to validate my hypothesis.” In the essay, he also flags 
a shorter-term complication: a rapidly strengthening yen has historically 
aligned with risk-off positioning as leveraged investors unwind yen-funded 
trades, dynamics he says can drag on Bitcoin before any liquidity impulse 
arrives. Hayes’ tactical conclusion is to stay patient until the balance-sheet 
evidence arrives. He says he exited levered Bitcoin proxies, including 
Strategy (MSTR) and Japan-listed Metaplanet, ahead of the yen move, and would 
consider re-entering if the “Foreign Currency Denominated Assets” line item 
starts rising sharply. Moreover, he writes that his fund Maelstrom is 
continuing to add to Zcash (ZEC), while keeping other “quality DeFi” positions 
unchanged and only adding further if intervention-driven balance sheet growth 
becomes visible. At press time, Bitcoin traded at $89,137. Featured image 
created with DALL.E, chart from TradingView.com

Bitcoin Won’t Break Out Until The Fed Steps Into Yen/JGB Chaos: Arthur Hayes

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