Coordinated action by the US Treasury, overseen by Secretary Scott Bessent, saw a targeted currency intervention in Japan last Friday. Crypto investor Arthur Hayes has issued a warning to traders regarding the upcoming Federal Reserve H.4.1 release, advising close scrutiny for evidence of Japanese use of US Treasury holdings as collateral. This action was purportedly taken to counter “disorderly yen movements.”
The H.4.1 report provides detailed information on the Fed’s balance sheet and repo activity with foreign central banks. According to Hayes, the data will reveal if Japan utilized the Financial Instrument Management and Accounting (FIMA) facility, a mechanism allowing foreign central banks to borrow against US Treasuries, for intervention. The FIMA repo facility is reportedly expected to be expanded in the coming months, according to Bessent’s statement.
Japan holds a significant stock of US Treasuries; selling these could elevate American yields and increase U.S. financing costs. The global cryptocurrency market cap stands at $2.2 trillion, with Bitcoin trading at approximately $63,000. There has been a 0.8% dip in the market cap over the last 24 hours, alongside a 4% drop in Bitcoin’s price over one week, currently valued at $62,000. Ethereum is priced at 1,800.
Crypto advocate Adam Livingston described the situation as “elite macroeconomic theater,” while Scott Bessent stated that the yen was “substantially undervalued.” Hayes indicated that increasing the counterparty limit for the FIMA repo facility would allow the Fed to create money using Ministry of Finance – Japan (MOF) TSY assets as collateral.
The implications of this intervention, particularly regarding global liquidity and potential effects on risk assets such as Bitcoin, remain speculative. The current market cap for crypto is experiencing a period of instability, as reflected in the sharp declines recorded recently. Further developments will be closely monitored by analysts including EGRAG Crypto who have warned about the potential unwinding of carry trades.
Written by Kate Hollinsworth
Economics Desk
