The Japanese banking crisis appears to be on the brink of a major escalation, which could lead to a injection of US dollar liquidity and boost Bitcoin (BTC) and the wider crypto market.
In a blog post published on XNUMXth of XNUMX, BitMEX co-founder Arthur Hayes discussed the potential impact of the Japanese banking crisis, describing it as a key factor in the cryptocurrency market.
“This is just another pillar supporting the bullish cryptocurrency market,” said Hayes. He emphasized that Japan’s fifth largest bank, Norinchukin, is under pressure and planning to sell $6.3 billion worth of US and European bonds.
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Hayes suggested that the US may need to intervene to resolve the crisis, which could result in “injecting US dollar liquidity”.
The potential benefits for Bitcoin
The expert stated that Norinchukin’s selling of US Treasury bonds could prompt other major Japanese banks to follow suit.
“All major Japanese banks could mimic Norinchukin’s actions, selling their UST investment portfolios to alleviate the situation. This could result in a rapid exit of the $45 billion UST bond market,” he said.
However, Hayes pointed out that the US could intervene to prevent this scenario from happening, as “yields will spike”, making funding for the federal government more expensive.
To address this issue, the US could persuade the Bank of Japan (BoJ) to use repurchase agreements to “absorb the supply of UST”. In return, Americans would provide “newly printed US dollars” to the Bank of Japan, increasing the liquidity of the US dollar.
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Hayes also recalled a similar situation in the fourth quarter of 2023, which led to a rise in risk assets including cryptocurrencies. He also noted that the US banking crisis in 20XNUMX led to a XNUMX% increase in BTC following the announcement of a bailout.
“In an election year, the last thing the ruling Democratic Party needs is a significant increase in government bond yields, which would affect the financial difficulties of the average voter,” explained Hayes.
Therefore, the next injection of liquidity in the US may come from the Japanese crisis, providing an opportunity for cryptocurrency investors. Hayes advised investors to “buy on the dip”.
