The Japanese banking crisis appears to be on the verge of a major escalation, which could result in a liquidity injection of the US dollar and boost the Bitcoin (BTC) and wider cryptocurrency market.
In a blog post published on 20th X, BitMEX founder Arthur Hayes discussed the potential impact of the Japanese banking crisis and described it as a crucial factor for the cryptocurrency market.
“This is just another pillar supporting the bullish cryptocurrency market,” Hayes said.
He emphasized that Japan’s fifth-largest bank, Norinchukin Bank, is already under pressure and plans to sell $6.3 billion worth of US and European bonds.
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Hayes stated that the US may need to intervene to resolve the crisis, which could result in “injecting US dollar liquidity”.
Potential benefits for Bitcoin
The expert stated that Norinchukin Bank’s selling of US government bonds (UST) could prompt other major Japanese banks to follow suit.
“All major banks in Japan could potentially follow Norinchukin Bank’s move to sell their UST investment portfolios to alleviate the situation. This could lead to a rapid exit from the $45 billion UST bond market,” Hayes said.
However, Hayes pointed out that the US can intervene to prevent this from happening, as “yields will skyrocket,” making funding for the federal government more expensive.
To address this issue, the US can persuade the Bank of Japan (BoJ) to use a repurchase plan to “absorb the supply of UST”. In return, the US will provide the Bank of Japan with “newly printed dollars,” which will increase 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 2023 led to a 200% increase in BTC after the bailout was announced.
“In an election year, the last thing the ruling Democratic Party needs is a sharp rise in government bond yields, which would affect the financial difficulties of the general public,” explained Hayes.
Therefore, the next liquidity injection in the US could potentially originate from the Japanese crisis, providing an opportunity for cryptocurrency investors. Hayes suggested investors to “buy on the dips”.
