In your last rehearsal Titled “The Easy Button”, Arthur Hayes, founder of cryptocurrency exchange BitMEX, investigates the dynamics of global monetary policies and their consequent links to what he describes as the imminent ‘Crypto Valhalla’. Hayes analyzes the political maneuvers of the world’s main economies, namely Japan, the United States and China, and their effects on the cryptographic scenario.
The Dawn of Crypto Valhalla
Hayes describes the Federal Reserve’s potential strategy, in coordination with the US Treasury, to engage in unlimited dollar-for-yen swaps with the Bank of Japan (BOJ). This measure aims to manipulate exchange rates to stabilize the yen without causing disruptive economic changes.
Hayes states: “The Fed, acting on orders from the Treasury, can legally exchange dollars for yen in unlimited amounts for as long as it wishes with the BOJ.” This tactic, according to Hayes, is intended to avoid immediate financial crises by postponing difficult economic decisions.
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The implications for Japan’s economy are serious, with Hayes predicting serious consequences if the Bank of Japan decides to raise interest rates: “If the Bank of Japan raises interest rates, it commits seppuku,” notes Hayes, using the term Japanese for ritual suicide to underline potential self-esteem. -destructive economic impact, given that the BOJ is the largest holder of Japanese government bonds (JGB) and would incur huge losses.
The yen’s devaluation also has significant ramifications for China’s global economic competitiveness, especially in exports. Hayes discusses how a weaker yen hurts China’s export economy by making Japanese goods cheaper internationally, directly competing with Chinese goods.
He suggests that the People’s Bank of China could respond by devaluing the yuan to maintain competitive balance. “If the yen continues to weaken, China will respond by devaluing the yuan,” predicts Hayes, outlining a potential economic retaliation that could destabilize global markets.
Hayes also theorizes about a dramatic monetary crisis political change in China involving its substantial gold reserves. He postulates that China could use these reserves to peg the yuan to gold, thus creating a new economic scenario.
“It is estimated that China has stored more than 31 thousand tons of gold (…) I believe that, for internal and external political reasons, China wants to keep the dollar-yuan rate stable.” By pegging the yuan to gold, China could potentially insulate itself from currency fluctuations and exercise greater control over its economic destiny.
The essay also addresses the intersection between US politics and economic policy, particularly in light of the approaching presidential election. Hayes speculates that domestic economic pressures, such as job losses and industry relocation, could significantly influence the Biden administration’s policy decisions.
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He argues that the administration can avoid aggressive moves against China to avoid a backlash in crucial states: “Biden must win these swing states to keep the Orange Man at bay. Biden cannot afford a devaluation of the yuan before the elections.”
Hayes suggests that these global currency maneuvers could lead to a bullish scenario for cryptocurrencies. He advises crypto traders and institutional investors to closely monitor the USDJPY exchange rate, stating that significant movements could indicate favorable changes in crypto valuations.
“Look at the USDJPY rate closer to what Solana developers monitor uptime,” he advises, highlighting the potential for substantial financial opportunities in the cryptocurrency space. At the time of a potential “Crypto Valhalla”, Hayes speculates that the pace of yen devaluation will accelerate downwards. “This will put pressure on the US, Japan and China to do something. O US elections is a crucial motivating factor for the Biden administration to find some solution.”
According to Hayes, a rise in the USDJPY towards 200 is “enough to get the Chemical Brothers to ‘Push the Button’. This analogy with the Chemical Brothers song highlights the urgency and drastic nature of the action needed to counter such a monetary imbalance.
“If my theory becomes reality, it will be trivial for any institutional investor to buy one of the Bitcoin ETFs listed in the US. Bitcoin is the best performing asset in the face of global fiat devaluation, and they know it. When something is done about the weak yen, I will mathematically estimate how flows into the Bitcoin complex will increase the price to $1 million and possibly beyond. Stay imaginative, be silly, now is not the time to be an idiot,” concludes Hayes.
At press time, Bitcoin traded at $70,835.
Featured image from YouTube / Tom Bilyeu, chart from TradingView.com