BitMEX founder Arthur Hayes wrote today that the crypto bull market is waking up again, about to pierce through the extravagant lies of central bank governors, suggesting going long on Bitcoin and then going long on altcoins. This article is sourced from Arthur Hayes, translated by MarsBit, and organized by Bitpush.
The USD/JPY exchange rate is the most important macroeconomic indicator, and in my previous article, I wrote that measures must be taken to strengthen the yen. The solution I proposed was for the Federal Reserve to exchange unlimited newly printed dollars for yen with the Bank of Japan (BOJ).
This way, the BOJ can provide unlimited dollar firepower to the Japanese Ministry of Finance (MOF) to enable them to buy yen in the global forex market.
While I still believe in the effectiveness of this solution, the central bank scammers in charge of the “Group of Idiots” (also known as the Group of Seven (G7)) seem to be choosing to make the market believe that over time, the interest rate differentials between the yen and the dollar, euro, pound, and loonie will narrow. If the market believes in this future state, they will buy yen and sell all other currencies, mission accomplished!
To make this magic work, the “high-interest” central banks of the G7 (the Federal Reserve, the European Central Bank, the Bank of Canada, and the Bank of England) must lower interest rates.
It is worth noting that the policy rate of the Bank of Japan (green) is 0.1%, while the policy rates of other countries are 4-5%. The interest rate differential between domestic and foreign currencies fundamentally drives the exchange rate. From March 2020 to early 2022, all countries have been playing the same game. As long as you don’t go out with a cold and inject mRNA heroin, everyone can make money for free.
When inflation manifests in such a huge way that the elites cannot ignore the pain and suffering of the common people, the central banks of the G7, except the Bank of Japan, have actively raised interest rates. The Bank of Japan cannot raise interest rates because it holds over 50% of the Japanese government bond (JGB) market. As interest rates fall, the prices of Japanese government bonds rise, making the Bank of Japan look solvent.
However, if the Bank of Japan allows interest rates to rise, leading to a drop in the Japanese government bonds it holds, this highly leveraged central bank will suffer catastrophic losses. I did some terrifying math for readers in “The Easy Button.”
Therefore, if the “bad girl” Yellen, who issues orders in the G7, decides to narrow the interest rate differential, the central banks with “high” policy rates will have no choice but to lower interest rates. According to orthodox central bank thinking, lowering interest rates is a good thing if the inflation rate is below target. What is the target?
For some reason, I don’t know why, the inflation target of the central banks of the G7 is 2%, regardless of cultural, growth, debt, population, and other differences. Is the current inflation rate rapidly exceeding 2%?
Each colored line represents the inflation target of different central banks in the G7. The horizontal line is at 2%. No government of a G7 country has published manipulated, dishonest inflation statistics below the target value. Wearing my technical analysis hat, it seems that the inflation rates of the G7 are forming a regional bottom in the 2-3% range and are about to rise sharply.
Considering this chart, orthodox central bank governors would not cut interest rates at the current level. However, this week, the Bank of England and the European Central Bank cut interest rates despite inflation being above target. This is strange. Is it financial turmoil that necessitates cheaper currency? Not really.
The problem lies with the weak yen. I believe the “bad girl” Yellen has stopped the interest rate hike performance. It is time to start maintaining the global financial system led by the United States. If the yen does not strengthen, the Chinese will release the dragon of yuan devaluation to match their main export competitor Japan’s super cheap yen. In the process, U.S. treasuries will be sold, and if this happens, the United States will be in trouble.
Next Steps
The G7 will hold a meeting in a week. The statement released after the meeting will be of great interest to the market. Will they announce some coordinated currency or bond market manipulation action to strengthen the yen? Or will they remain silent but agree that everyone except the Bank of Japan should start lowering interest rates? Stay tuned!
The biggest question is whether the Federal Reserve will start lowering interest rates near the November U.S. presidential election. Normally, the Federal Reserve does not change course near the election. However, normally, favored presidential candidates do not face potential imprisonment, so I am prepared to be flexible with my thoughts.
If the Federal Reserve starts lowering interest rates at the upcoming June meeting and their preferred, manipulated inflation index is above the target value, the USD/JPY will drop significantly, meaning the yen will strengthen.
I don’t think the Federal Reserve is prepared to lower interest rates because the slow-burning Joe Biden is facing scrutiny in opinion polls due to rising prices. It is understandable that the American people are more concerned about the rising cost of their vegetables than the cognitive abilities of the vegetables running for re-election. Fair to say, Trump is also a vegetable, as he enjoys chewing on McDonald’s fries while watching “Shark Week.” I still believe that lowering interest rates is political suicide. My fundamental view is that the Federal Reserve will stand still.
On June 13, while these second-rate fools sat down to enjoy a lavish meal paid for by taxpayers, the Federal Reserve and the Bank of Japan held their policy meetings for June. As I said before, I expect the Federal Reserve and the Bank of Japan not to change monetary policy. The Bank of England will hold a meeting shortly after the G7 meeting ends. While it is widely believed that they will maintain policy rates, considering the rate cuts by the Bank of England and the European Central Bank, I think they will surprisingly cut policy rates. The Bank of England will not suffer any losses. The Conservative Party will be beaten to a pulp in the next election, so there is no reason to defy the orders of the former colonial rulers to suppress inflation.
Helicopter Money
The June central bank drama that kicked off with rate cuts by the Bank of England and the European Central Bank this week will propel cryptocurrencies out of the summer slump in the Northern Hemisphere. This is not the fundamental scenario I expected. I thought the fireworks would start in August, around the time of the Federal Reserve’s Jackson Hole Symposium. That is usually where sudden policy changes are announced in the fall.
The trend is clear. Central banks around the world are starting a loose cycle.
We know how to play this game. Since 2009, we’ve been playing this damn game, when our savior Satoshi Nakamoto gave us the weapon to defeat the TradFi devil.
Go long on Bitcoin, and then shitcoins.
Compared to my baseline, there have been changes in the macro situation. Therefore, my strategy should also change accordingly. For the Maelstrom investment portfolio project, they have sought my advice on whether to launch tokens now or later. My advice is: “Launch it damn it!”
As for my excess liquidity in crypto synthetic USD cash (also known as Ethena’s USD (USDe)), it is earning some hefty annual rates, and now is the time to redeploy it into believed shitcoins. Of course, I will tell readers what these are after I buy them. But I just want to say that the crypto bull market is waking up and is about to skin and string the extravagant central bank governors.
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