The co-founder of BitMEX, Arthur Hayes, shared his prediction about the price of Bitcoin. He believes that it would climb to $1 million, thanks to the Bank of Japan and the Federal Reserve.
He said that it would happen when the two banks would hit the ‘easy button’ for rescuing the flagging currency of the Asian nation.
The currency
According to Hayes, the most important global economic variable currently is the dollar-yen exchange rate.
This is due to its potential to influence central bankers to increase the money supply globally. However, he said that the story started in China.
It should be noted that the ongoing devaluation trend of the yen would have the biggest impact on China.
This is because a stronger yen and weaker yuan hurt China’s competitiveness in terms of exports. China will have to devalue the yuan to combat the weakening of the yen.
The local goods of a country are denominated in its local currency. Therefore, countries that depend on exports for their economy can benefit from a fast-inflating currency.
In the automotive export market, Japan is China’s biggest competitor. With the yen getting cheaper, it is difficult for China to compete with Japan in terms of prices.
The Bank of Japan
Hayes believes that the Bank of China will pressure the US into pushing Japan to strengthen the yen. But, he added that the Bank of Japan (BOJ) would encounter issues.
Traditional methods, such as pushing up interest rates, would not be enough to strengthen the yen. According to Hayes, the BOJ’s meltdown would be faster than Sam Bankman-Fried’s meltdown.
He explained that it was because this would have a direct impact on Japanese government bonds. The central bank owns 50% of these bonds.
To prevent the collapse of the bonds, the BOJ would have to pressurize pension funds and local banks to buy the government’s debt.
To fund that purchase, the bank would have to sell US stocks and US Treasuries and this would be against American interests.
The benefits
Therefore, Hayes said that rather than increasing interest rates, the ‘easy button’ is the more appropriate solution.
This refers to the unlimited US dollar ‘swap line’ where the Federal Reserve and BOJ swap currencies at a specific rate.
As it is possible for the BOJ to print yen freely, they can acquire dollars free of cost. These dollars can be used to purchase the yen.
This would strengthen the Japanese currency and weaken the dollar. The final outcome would benefit everyone.
The BOJ would stay solvent, while the Chinese yuan would remain weaker than the yen. Lastly, the dollar would weaken due to BOJ’s yen purchases.
This would also benefit crypto environments because money printing usually pushes up the price of Bitcoin, along with other assets.
Hayes said that when the weak yen is addressed, it would automatically benefit Bitcoin. Thus, its price is likely to climb and could even reach $1 million.