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▲ Yen (JPY), Dollar (USD), Bitcoin (BTC)/AI Generated Image
Bitcoin (BTC) investors are closely watching this week's Federal Reserve report. If Japan's yen defense moves are confirmed, concerns about the liquidation of yen carry trades and forced selling of risk assets could resurface.
According to crypto media outlet Cryptopotato on August 3 (local time), crypto investor Arthur Hayes stated that the Federal Reserve's (Fed) H.4.1 report, to be released this week, should be closely watched. This is because it can confirm whether Japan has recently procured dollars using US Treasury bonds as collateral during its yen market intervention.
The H.4.1 report weekly discloses the Fed's balance sheet and details of repurchase agreement transactions with foreign central banks. US Treasury Secretary Scott Bessent recently stated that the joint foreign exchange market intervention was a measure to prevent "disorderly yen movements." He added that he is in close consultation with the Bank of Japan (BOJ) and the Ministry of Finance (MOF) and may engage in further joint interventions.
Bessent also called for an increase in the limit of the Foreign and International Monetary Authorities (FIMA) repurchase agreement facility. Hayes said, "If the counterparty limit is increased, the Fed can create money using US Treasury bonds held by the Japanese Ministry of Finance as collateral." Japan can borrow dollars through this facility without selling US Treasury bonds on the market.
Bitcoin supporter Adam Livingston explained that Japan needs dollars to defend the yen. If Japan sells a large amount of its US Treasury bonds, US Treasury yields could rise, and funding costs could increase. Market liquidity could also decrease, but using the FIMA facility could help avoid the shock of selling US Treasury bonds, according to the analysis.
Japan's low-interest rate policy has long supported yen carry trades, where investors borrow yen cheaply to invest in stocks and cryptocurrencies. Analyst EGRAG CRYPTO warned that if the yen's value rises rapidly, these positions could be liquidated abruptly. During liquidation, forced selling could occur across all risk assets, including Bitcoin.
The H.4.1 report was cited as a key market event alongside Friday's US non-farm payroll report and this week's ISM Manufacturing PMI release. Analyst Daan Crypto Trades assessed that the Bitcoin and cryptocurrency markets have underperformed compared to the recent tech stock rebound. He attributed this to a shift in liquidity, with speculative funds returning to the stock market more quickly.
[Article Key Summary]
-Arthur Hayes stated that this week's Fed H.4.1 report should be watched to confirm traces of Japan's dollar procurement.
-If the FIMA facility is expanded, Japan can borrow dollars using US Treasury bonds as collateral without selling them.
-If the yen quickly strengthens, yen carry trade liquidations and forced selling of risk assets, including Bitcoin, could occur.
*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*
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