Arthur Hayes says a potential expansion of Federal Reserve liquidity for Japan could support Bitcoin (BTC) and Ethereum (ETH) if efforts to defend the yen accelerate.
Key Points:
- Hayes argues an expanded FIMA repo facility could give Japan more dollars for yen intervention without forcing large U.S. Treasury sales.
- FIMA currently carries a $60 billion per-counterparty limit, while Hayes estimates Japan and GPIF hold $1.373 trillion in eligible Treasuries.
- He expects additional dollar liquidity to favor Bitcoin, gold and Ethereum, although any expansion still depends on Federal Reserve action.
Bitcoin Liquidity
The BitMEX co-founder laid out the case in his Aug. 10 “Yen-quake” essay, arguing that Japan has limited options for strengthening its currency without creating problems elsewhere. Aggressive Bank of Japan rate hikes could raise debt-service pressure, while large foreign-asset sales by Japanese institutions could push U.S. Treasury yields higher. That leaves FIMA as his preferred route.
Under the Federal Reserve’s Foreign and International Monetary Authorities repo facility, approved foreign authorities can temporarily exchange U.S. Treasuries for dollars instead of selling the securities outright. Japan’s Finance Ministry said Aug. 3 that it plans to use the facility in the future.
The obstacle is scale. FIMA caps each counterparty at $60 billion, while Hayes estimates Japan’s government holds $1.143 trillion in Treasuries and the Government Pension Investment Fund holds another $230 billion, bringing the combined pool to $1.373 trillion.
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Hayes Crypto Bet
Hayes argues that a larger facility could expand dollar liquidity as Japan borrows against Treasuries and sells those dollars to buy yen. “The more they print, the higher Bitcoin goes,” he wrote. The thesis remains conditional.
Scott Bessent has separately urged the Fed to expand FIMA, while economist Daleep Singh said a larger facility would be a “shock absorber, not a cure” for currency trends. Hayes said he is increasing exposure to Bitcoin, physical gold and gold miners while watching for rule changes, and he called Ethereum the “large cap sleeper.”
He also highlighted Ethena (ENA) as a higher-risk bet that could benefit if stronger Bitcoin markets lift basis yields.
The yen fell to 163.24 per dollar in July, its weakest level since 1986, before the United States and Japan jointly intervened to support the currency on Jul. 31. The Bank of Japan kept its policy rate at 1% around the same period, leaving rate differences and further intervention at the center of the yen debate.
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