Arthur Hayes In-Depth Analysis: If the Federal Reserve Intervenes in the Yen, It Could Trigger the Next Bitcoin Bull Run

The New York Fed recently conducted a rare foreign exchange verification operation, widely seen as a precursor to intervention in the currency market. Meanwhile, the 10-year Japanese government bond yield has soared from around 1% in 2024 to over 2%.

BitMEX co-founder and well-known cryptocurrency analyst Arthur Hayes recently put forward a compelling view: if the Federal Reserve expands its balance sheet to intervene in the yen and Japanese government bond markets, it would directly benefit risk assets like Bitcoin.

Market Warning

An “avalanche warning” has already sounded in the financial markets. Hayes uses the vivid metaphor of a “mountain muffled roar” to describe the deep structural risks currently facing the Japanese financial market. When a fragile layer forms between surface snow and the underlying ice shell, slight pressure can trigger a large-scale avalanche. Similarly, Japan’s financial market appears stable on the surface but harbors underlying crises.

The persistent weakness of the yen combined with the rising Japanese government bond yields creates a rare and dangerous combination. This abnormal phenomenon reflects structural pressures within Japan’s financial system spilling over into global markets.

Core Logic

Hayes’s core theory revolves around possible intervention pathways by the Federal Reserve. He suggests that if the yen continues to weaken and causes instability in the Japanese bond market, the Fed might intervene.

In theory, the New York Fed could create bank reserve liabilities (i.e., dollars) by selling dollars through primary dealers in the forex market to buy yen, then use those yen to purchase Japanese government bonds. This operation would achieve three goals simultaneously: push up the yen exchange rate, lower Japanese bond yields, and effectively expand the Fed’s balance sheet.

The key point is that while this intervention would expand the Fed’s balance sheet, it could be “justified” as not being quantitative easing. Nonetheless, the outcome would be injecting new dollar liquidity into the system.

Market Status

The market is currently at a critical crossroads. Japanese authorities are highly sensitive to the USD/JPY exchange rate at the 160 level, which in 2024 triggered intervention actions.

Last Friday, the New York Fed, representing the U.S. Treasury, conducted a foreign exchange verification, the strongest signal since the G7 coordinated intervention after the 2011 Japan earthquake. The dollar index experienced its largest weekly decline since April last year, while the yen appreciated for the first time in four months. These market fluctuations indicate that traders are pricing in the possibility of intervention.

Meanwhile, the Bank of Japan faces a dilemma: to curb the rapid depreciation of the yen while avoiding signaling overly hawkish policies that could cause Japanese bond yields to jump sharply.

Intervention Motivation

Hayes points out that the U.S. motivation for participating in intervention is not only to support allies but also based on its own interests.

Japanese investors are among the largest holders of U.S. Treasuries, with a foreign debt investment portfolio assets totaling $2.4 trillion, most of which are in U.S. debt. If Japanese institutions sell off U.S. bonds to repatriate funds due to rising domestic yields, it would push up U.S. borrowing costs.

Additionally, a significant depreciation of the yen would harm U.S. manufacturers’ global export competitiveness. A stable but not overly strong yen aligns with U.S. strategic interests, especially considering the “America First” trade policies emphasized by the Trump administration. Japanese Finance Minister Aso Tsukasa and U.S. Treasury Secretary Janet Yellen have maintained a consistent stance on exchange rate issues, laying the groundwork for possible joint action.

Bitcoin Impact

Hayes believes that global monetary and liquidity conditions, rather than specific crypto market sentiment or ETF fund flows, will be the key drivers of Bitcoin’s next major rally. According to his analysis, if the Fed expands its balance sheet through intervention in the yen and Japanese bonds, the newly created dollar liquidity will seek scarce assets, with Bitcoin being one of the main beneficiaries.

Gate platform data shows that as of January 28, 2026, Bitcoin’s price was $89,276, with a market cap of $1.78 trillion, accounting for 56.33% of the market. Recently, Bitcoin has been active, briefly surpassing $91,000 in the early hours of January 24. Market volatility led to large-scale liquidations, with one trader’s short position being liquidated for about $60 million.

Trading Strategy

In light of this potential shift, Hayes has adjusted his holdings. He revealed that before the recent yen fluctuations, he had reduced high-leverage Bitcoin proxy positions. He explicitly stated that he would not increase risk exposure until confirming that the Fed is indeed injecting liquidity to stabilize the yen and Japanese bond markets.

Hayes’s Maelstrom fund continues to increase holdings in Zcash ($ZEC) and maintains positions in other high-quality DeFi tokens. If intervention is confirmed, the fund plans to increase investments in DeFi tokens such as ENA, ETHFI, PENDLE, and LDO.

When the dollar index experienced its largest weekly decline since April last year, the price curves of the yen and Bitcoin on Gate’s charts began to show subtle correlation. Hayes observes changes in the Fed’s balance sheet “foreign currency-denominated assets,” believing this seemingly insignificant accounting item could become the trigger for the next crypto market rally. The Fed’s foreign exchange verification operation has already sent the first signal. The market is watching, waiting for when this unconventional liquidity channel will officially open, at which point the curves on Bitcoin’s price chart may once again confirm the ancient rule of global capital flows: water flows to the low, money flows to the high.