Arthur Hayes: Fed's FIMA Expansion Could Fuel Massive Bitcoin (BTC) Rally

Key Takeaways

Table of Contents

Washington and Tokyo are collaborating to bolster the Japanese yen through the Fed’s FIMA facility, which would involve printing dollars to purchase yen
Japan’s central bank faces constraints on interest rate increases due to risks of bond market collapse and global carry trade disruptions
GPIF, Japan’s massive pension fund, could be pressured to liquidate American assets and repatriate funds, posing risks to US financial markets
FIMA program expansion would inflate the Federal Reserve’s balance sheet, historically correlated with rising Bitcoin valuations
Former BitMEX CEO Arthur Hayes identifies Bitcoin, Ether, and Ethena (ENA) as prime opportunities if US dollar liquidity increases

A coordinated effort between Washington and Tokyo is taking shape to strengthen Japan’s currency. Treasury Secretary Scott Bessent has openly advocated for expanding a Federal Reserve mechanism that would enable Japan to exchange its holdings of US government debt for dollars, subsequently deploying those dollars to purchase yen on foreign exchange markets.

Arthur Hayes: Fed-Backed Yen Rescue Could Fuel Bitcoin, Gold and Ether
BitMEX co-founder Arthur Hayes said the most likely path to a stronger yen is not aggressive Bank of Japan rate hikes or large-scale Treasury sales, but Japan using the Federal Reserve’s FIMA repo facility to… pic.twitter.com/tT0XDjjflH
— Wu Blockchain (@WuBlockchain) August 11, 2026

The mechanism under discussion is the FIMA Repo Facility. Currently, this program limits each participating entity to $60 billion in active loans. Bessent’s proposal calls for eliminating this ceiling and broadening participation to encompass major Japanese financial entities, particularly the Government Pension Investment Fund, commonly referred to as GPIF.

The Origins of Yen Weakness

Japan’s currency began its prolonged decline with the introduction of Abenomics in 2012. Under former Prime Minister Shinzo Abe’s leadership, the Bank of Japan adopted unlimited yen printing to purchase government debt, implementing what became known as yield curve control. The strategy deliberately aimed to devalue the yen and enhance export competitiveness.

The approach succeeded. Over the subsequent ten years, the yen depreciated by more than 50%. Japan’s weakened currency transformed into the preferred funding source globally. Financial players borrowed cheaply in yen, invested in higher-returning dollar and euro assets, and captured the spread.

Implications of FIMA Program Expansion

Should the Federal Reserve’s Foreign Currency Subcommittee, now led by Fed Chair Kevin Warsh, eliminate FIMA’s borrowing limits, Japan could leverage as much as $1.37 trillion in US Treasury securities through repo agreements. This figure encompasses $1.14 trillion controlled by Japan’s government plus $230 billion managed by GPIF.

The Federal Reserve would create new dollars to finance these transactions. This action would expand the Fed’s balance sheet. Historical data shows a strong correlation between Fed balance sheet growth and Bitcoin price appreciation.

Hayes anticipates this scenario will materialize. He believes Warsh, consistent with previous Fed chairs, will align with political guidance from the Trump administration.

Alternative pathways to yen strengthening remain problematic for Japan. Aggressive interest rate increases would devastate Japanese government bond valuations already on the BOJ’s books, generating enormous unrealized losses. When the BOJ surprised markets with a rate hike in July 2024, the yen surged from 160 to 140 within days, while both the Nasdaq and Nikkei plummeted over 10%. The central bank promptly reversed course.

The alternative strategy of having Japanese entities liquidate American equities and bonds to repatriate capital is equally untenable currently. Japan’s security depends on US military protection, and widespread dumping of American assets would severely damage Treasury and equity markets that underpin American global power.

Therefore, FIMA expansion represents the most viable solution.

Cryptocurrency Investment Opportunities

Hayes maintains Bitcoin remains a foundational holding. For anticipated upward momentum, he identifies Ether as an attractive large-cap alternative, noting it stands as the only major cryptocurrency that failed to achieve a new all-time high in 2025.

He additionally spotlights Ethena, trading under ticker ENA, as a more speculative opportunity. ENA has declined over 90% from peak levels. Its USDe stablecoin experienced a 75% supply contraction as Bitcoin basis yields compressed. Hayes argues that even modest Bitcoin price recovery could revive USDe yields and attract capital inflows, potentially driving ENA upward by 5x.

Hayes has not yet fully deployed capital into these positions and awaits official confirmation of FIMA rule modifications.