Bitcoin (BTC) Price, No Use Looking at the Dollar?...Hayes "Look at the Euro-Yen Exchange Rate"

▲ Bitcoin (BTC), Euro (EUR), Japanese Yen (JPY)/AI-generated image

The Euro-Yen exchange rate (EUR/JPY), rather than Federal Reserve statements, has been identified as the signal that will determine Bitcoin (BTC)'s next direction.

According to cryptocurrency media outlet Cryptopotato on September 3 (local time), Arthur Hayes, Chief Investment Officer of Maelstrom, presented EUR/JPY as a leading indicator of new dollar liquidity. At the time, EUR/JPY was around 185, and he predicted it would fall below 140 by June 2027. He argued that the actual dollar supply path should be watched more closely than the Federal Reserve's (Fed) hawkish statements.

Hayes pointed to the French banking sector as a potential crack point. He noted that BNP Paribas, Credit Agricole, and Societe Generale are responsible for approximately 20% of lending in the US repurchase agreement market. He analyzed that if the spread in French government bond yields widens and capital outflow from the banking sector continues, these banks could reduce their funding in the US market.

He predicted that if French banks' funding tightens, the New York Federal Reserve (New York Fed) would expand its Reserve Management Purchase (RMP) program. He explained that this program already buys 39% of US short-term Treasury issuances and has increased the Fed's balance sheet by approximately $22 billion each month since December last year. Hayes projected that if the US Treasury also expands its long-term Treasury purchases, the monthly increase could approach $100 billion.

The exchange rate policy of US Treasury Secretary Scott Bessent is also a pillar of his logic. Hayes analyzed that Japan, South Korea, and Taiwan could utilize the Fed's Foreign and International Monetary Authorities (FIMA) Repo facility instead of directly selling their dollar assets. He also cited Bessent's past actions of selling euros and buying yen through the US Treasury's Exchange Stabilization Fund (ESF) as evidence.

Regarding the hawkish statements by Fed Governor Kevin Warsh, Hayes said, "I don't pay attention to what Warsh says." Maelstrom continues to hold Bitcoin as a long-term core asset. Hayes predicted that the decline in EUR/JPY and funding pressure on the French banking sector could trigger an expansion of the Fed's dollar supply, and such liquidity changes would positively impact the Bitcoin and cryptocurrency markets.

[Key Article Summary]

-Hayes identified EUR/JPY, rather than Fed statements, as the key indicator to determine Bitcoin's next move.

-He predicted that EUR/JPY would fall from approximately 185 to below 140 by June 2027, and that French banks' funding in the US market would contract.

-Hayes' core argument is that if the Fed expands dollar liquidity, the Bitcoin and cryptocurrency markets could benefit.

*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.*