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 broader crypto market.
In a blog post published on October 20th, BitMEX 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,” Hayes said. 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”.
Potential benefits for Bitcoin
The expert stated that Norinchukin’s sale of US Treasury bonds (UST) could prompt other major Japanese banks to follow suit.
“All major banks in Japan could mimic Norinchukin’s actions, selling their UST investment portfolios to alleviate the situation. This could lead to a rapid exit of the $45 billion UST bond market,” Hayes said.
However, Hayes pointed out that the US could intervene to prevent this situation from happening, as “yields will skyrocket,” making federal funding 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, the US would provide the BoJ with “newly printed US dollars,” increasing dollar liquidity.
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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 the 200th month of 2023 resulted in a 10% increase in BTC after the bailout announcement.
“In an election year, the last thing the ruling Democratic Party needs is a significant increase in government bond yields, which will affect the financial difficulties of the general electorate,” Hayes explained.
Therefore, the next liquidity injection in the US may come from the Japanese crisis, providing an opportunity for cryptocurrency investors. Hayes advised investors to “buy on the dip”.
