In a new macro essay titled Yen-quake, BitMEX co-founder and Maelstrom Chief Investment Officer Arthur Hayes argues that a coordinated effort between the US Treasury and Japanese financial authorities to strengthen the Japanese yen will trigger a massive expansion of the Federal Reserve’s balance sheet, unlocking a wave of dollar liquidity that will fuel the next major crypto rally.
Hayes asserts that the decade-long policy of a hyper-weakened yen, initiated under former Prime Minister Shinzo Abe’s “Abenomics”, has reached its limit due to rising domestic public dissatisfaction in Japan and geopolitical frictions with trade partners. However, Hayes dismisses two traditional methods for strengthening the currency: aggressive rate hikes by the Bank of Japan (BOJ) and direct asset liquidations by Japanese institutions like the Government Pension Investment Fund (GPIF). According to Hayes, aggressive BOJ rate hikes risk destabilizing Japan’s sovereign bond market, while widespread selling of foreign assets by Japanese funds could crash US stock and Treasury markets.
The Preferred Mechanism: Expanding the Fed’s FIMA Facility
Instead, Hayes highlights a third mechanism endorsed by US Treasury Secretary Scott Bessent: utilizing the Federal Reserve’s Foreign and International Monetary Authorities (FIMA) Repo Facility. Under this structure, the Ministry of Finance (MOF) and other Japanese public institutions would pledge their vast holdings of US Treasuries to the Fed as collateral in exchange for dollar loans. The MOF would then sell those dollars on the open market to buy yen and purchase domestic securities.
To make the intervention effective, Hayes notes that the Fed’s Foreign Currency Subcommittee, led by Fed Chair Kevin Warsh, would need to lift the existing $60 billion per-counterparty limit on the FIMA facility and expand eligibility to quasi-public entities like the GPIF.
Because the Fed would need to issue fresh dollars against the pledged Treasury collateral, Hayes contends the facility would function as an indirect money-printing mechanism, leading to a substantial expansion of the Fed’s balance sheet.
Impact on Digital Assets and Market Strategy
Drawing historical parallels to the aggressive balance sheet expansion during the 2020–2021 pandemic period, Hayes argues that influxes of central bank fiat liquidity consistently find their way into scarce, fixed-supply financial assets rather than real-economy investments.
While maintaining a core long exposure to Bitcoin, Hayes identified Ether (ETH) and synthetic dollar protocol Ethena (ENA) as high-upside opportunities ahead of the monetary shift. He argued that a liquidity-driven Bitcoin price rally would compress basis yields across centralized exchanges, driving capital back into yield-bearing stablecoin protocols like Ethena.
Hayes indicated that Maelstrom will closely monitor potential policy adjustments to the FIMA program by the Fed’s Foreign Currency Subcommittee before deploying cash reserves into higher-beta digital assets.
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