Arthur Hayes, co-founder of popular cryptocurrency derivatives trading platform BitMEX, has recently revealed a theory on the exchange rate between the U.S. dollar and the Japanese yen, and how a weakening yen could see Bitcoin’s price top the $1 million mark.

In his latest newsletter titled “The Easy Button” Hayes, currently the Chief Investment Officer of Maelstrom, argued that efforts to address the weakening of the Japanese yen could help push the price of the flagship cryptocurrency upward. He said:

Bitcoin is the best-performing asset in the face of global fiat debasement, and they know it. When something is done about the weak yen, I will mathematically guestimate how flows into the Bitcoin complex will ratchet the price to $1 million and possibly beyond.

Hayes’ theory is based on the monetary policies of Japan, China, and the US and how the dollar-yen exchange rate is crucial for the global economy, with the Federal Reserve, using Treasury orders, being able to swap dollars for yen with Japan’s central bank to manipulate the exchange rate and avoid raising interest rates, which would hurt the Bank of Japan.

The founder of BitMEX added that this allows the Bank of Japan to support its yen without having to sell U.S. Treasurys, which in turn helps the U.S. Treasury by preventing it from becoming a forced seller and maintaining low yields.

Per his words, economic competition between China and Japan, particularly when it comes to exports, often boils down to the price, and a weaker yen could see China devalue its yuan to maintain competitiveness. This would, in turn, hurt American manufacturers and potentially lead to further outsourcing.

Hayes also speculated that China could even use its abundant gold reserves – which have been growing significantly – to back the yuan and destabilize financial institutions in the West.

To counter all of this, Hayes suggested a scenario in which the Federal Reserve intervenes by printing U.S. dollars and exchanging them for yen, to provide the Bank of Japan with resources to stabilize the currency market while allowing China to continue its monetary expansion.

Such a strategy, he said, could lead to the devaluation of the US dollar and that, coupled with Bitcoin’s rise, could threaten the dollar’s status as the world’s reserve currency. If the theory holds, then institutional investors will move to spot Bitcoin exchange-traded funds (ETFs) as a hedge against the decline of traditional fiat currencies.

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