Japanese banks sell off US Treasuries, good news for the cryptocurrency community!

Arthur Hayes, co-founder of BitMEX, published an in-depth analysis on his personal blog, noting that Japan's fifth-largest bank, Norinchukin Bank, recently decided to sell its holdings of up to $63 billion worth of US and European bonds. This move foreshadows a possible chain reaction, where other Japanese banks may follow its lead, with a total sell-off of a staggering $450 billion in US Treasuries.

Hayes elaborated on the motivations of Japanese banks to sell US Treasuries, mainly due to the sharp widening of the interest rate differential between the United States and Japan. This widening interest rate differential has led to a sharp increase in the foreign exchange hedging costs required by Japanese banks to hold US Treasuries, resulting in losses on holding these bonds. In the current economic environment, the attractiveness of holding US Treasuries has dropped significantly.

Hayes also further predicted that given the current election year context, US Treasury Secretary Yellen may take action to stabilize financial markets. He may ask the Bank of Japan to absorb these sold bonds through the Federal Reserve's Foreign and International Monetary Authorities (FIMA) repurchase tool to prevent a sharp rise in U.S. bond yields and thus avoid triggering turmoil in the financial market.

Hayes' analysis further pointed out that if the Federal Reserve adopts a large-scale printing method to repurchase these U.S. bonds sold by Japan, this will inject a new round of U.S. dollar liquidity into the cryptocurrency market. This increase in liquidity is likely to boost the bull market in the cryptocurrency market and bring rich returns to investors. Hayes emphasized that in order to maintain the current dollar-based financial system, an increase in the supply of U.S. dollars is inevitable, which will undoubtedly push up the prices of crypto assets including Bitcoin.

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