Arthur Hayes: Continues to Bullish on Bitcoin Against Gold, Dollar Liquidity Growth Could Drive ETH to 5x in the Coming Months

August 11th. Arthur Hayes wrote that the Japanese Yen is becoming a core variable in his current macro trading framework. He believes that over the past decade, the continuous depreciation of the Yen has made it an important funding currency for global businesses and speculators, but this phase is coming to an end. Hayes listed three ways to drive the appreciation of the Yen: the Bank of Japan significantly raising interest rates, Japanese institutions selling overseas assets and repatriating funds, and the solution he considers most likely — the Japanese Ministry of Finance using the Fed's FIMA repo tool to pledge US Treasuries held to obtain dollars, then selling the dollars to buy Yen.

Hayes believes that the first two scenarios face significant resistance. A rapid interest rate hike by the Bank of Japan may push up Japanese government bond yields, expand the central bank's balance sheet losses, and force Yen carry trades to unwind, thereby impacting global stock and bond markets. If GPIF and other Japanese institutions sell US stocks and bonds on a large scale and repatriate funds to Japan, it may also put pressure on the US financial markets. Therefore, he favors the third scenario of intervening in the exchange rate through the FIMA tool.

According to Hayes' proposal, the Japanese Ministry of Finance could pledge US Treasuries to the Fed, obtain dollar loans through FIMA, sell the dollars to buy Yen, and reinvest the Yen obtained into Japanese government bonds and stocks. He believes that this mechanism would require the Fed to create dollar liquidity, and its balance sheet would expand as the FIMA repo scale increases. The current unsecured loan limit for a single counterparty under FIMA is $600 billion. Hayes concludes that if the relevant restrictions are lifted and extended to large Japanese institutions such as GPIF, greater dollar liquidity could be unleashed.

Hayes continues to be bullish on Bitcoin, physical gold, and gold mining companies, stating that if the Fed's balance sheet undergoes a large-scale expansion again, "the more they print, the higher Bitcoin will rise." In the cryptocurrency space, he sees ETH as a potential opportunity among large assets, citing reasons such as its failure to break its all-time high in 2025 and Ethereum's potential to become a security layer for RWAs. He is also optimistic about ENA, believing that if increased dollar liquidity drives BTC's rise, the recovery of Bitcoin basis returns may attract funds back to USDe, and stating that ENA may see a fivefold increase in the coming months. However, Hayes mentioned that he has not yet significantly reduced his dollar position and is still waiting to see if there will be actual adjustments to the FIMA rules.