In his latest essay titled “The Easy Button,” Arthur Hayes, founder of cryptocurrency exchange BitMEX, delves into the dynamics of global monetary policy and its resulting connections to what he describes as the coming “Crypto Valhalla.” Hayes examines the political maneuvers of the world’s major economies, especially Japan, the United States and China, and their impact on the crypto landscape.

The dawn of crypto-valhalla

Hayes outlines a potential strategy for the Federal Reserve, in cooperation with the U.S. Treasury, to engage in unlimited dollar-yen exchange transactions with the Bank of Japan (BOJ). This measure aims to manipulate exchange rates in order to stabilize the yen without causing disruptive economic changes.

Hayes states: “The Fed, acting on behalf of the Treasury, can legally exchange dollars for yen in unlimited amounts for as long as it wants at the BOJ.” According to Hayes, this tactic aims to avoid immediate financial crises by postponing complex economic decisions.

The consequences for the Japanese economy are severe, and Hayes predicts earnest consequences if the BOJ decides to raise interest rates: “If the BOJ raises interest rates, it will be committing seppuku,” notes Hayes, using the Japanese term for ritual suicide to emphasize the potentially devastating impact on the economy. , given that the BOJ is the largest holder of Japanese government bonds (JGBs) and would suffer huge losses.

The devaluation of the yen also has significant consequences for China’s global economic competitiveness, especially in exports. Hayes discusses how a weaker yen hurts China’s export economy by making Japanese goods cheaper internationally, directly competing with Chinese products.

He suggests that the People’s Bank of China could respond by devaluing the yuan to maintain competitive balance. “If the yen continues to weaken, China will respond by devaluing the yuan,” Hayes predicts, outlining a potential economic blowback that could destabilize global markets.

Hayes further theorizes about a dramatic shift in monetary policy in China, including significant gold reserves. He believes China could exploit these reserves to peg the yuan to gold, thereby creating a recent economic landscape.

“It is estimated that China has accumulated over 31,000 tons of gold […] “I believe that for domestic and foreign political reasons, China wants to keep the dollar-yuan exchange rate stable.” By pegging the yuan to gold, China could potentially insulate itself from currency fluctuations and exercise greater control over its economic fate.

The essay also discusses the intersection of American politics and economic policy, especially in airy of the upcoming presidential elections. Hayes speculates that domestic economic pressures, such as job losses and production relocation to other countries, could significantly influence the Biden administration’s policy decisions.

He argues that the administration may avoid aggressive moves against China to prevent a backlash in key states: “Biden needs to win these battleground states to stop the Orange Man. Biden cannot afford to devalue the yuan before the election.”

Hayes suggests that these global currency maneuvers could lead to a bullish scenario for cryptocurrencies. It advises cryptocurrency traders and institutional investors to closely monitor the USDJPY exchange rate, saying significant movements could indicate changes that are favorable to cryptocurrency valuations.

“Watch the USDJPY rate more closely than Solana developers monitor uptime,” he advises, highlighting the potential for significant financial opportunities in the cryptocurrency space. As for the timing of a potential “Crypto Valhalla,” Hayes speculates that the pace of yen depreciation will accelerate to collapse. “This will put pressure on the US, Japan and China to do something. The US elections are a key motivator for the Biden administration to find a solution.”

According to Hayes, a rise in USDJPY towards 200 is “enough to bet on the Chemical Brothers and Push the Button.” This Chemical Brothers song analogy highlights the urgency and drastic nature of the actions needed to counter such currency imbalances.

“If my theory becomes reality, it will be trivial for any institutional investor to buy one of the US-listed Bitcoin ETFs. Bitcoin is the most effective asset in the face of global fiat currency devaluation and they know it. When something is done about the weak yen, I will mathematically estimate how inflows into the Bitcoin complex will push the price to $1 million and possibly higher. Stay imaginative, be stupid, this is not the time to be a smartass,” Hayes concludes.

At the time of publication, Bitcoin was trading at $70,835.

Featured image from YouTube / Tom Bilyeu, chart from TradingView.com