Arthur Hayes: Fed’s Trillion-Dollar FIMA Expansion Could Trigger Bitcoin (BTC) Rally

Key Takeaways

• US and Japanese officials are collaborating to bolster the yen through the Fed’s FIMA facility, which would involve printing dollars to purchase yen
• Aggressive rate hikes by the Bank of Japan risk destabilizing bond markets and unwinding the global carry trade
• Japan’s Government Pension Investment Fund could be pressured to liquidate US assets and repatriate funds, posing risks to American markets
• An expanded FIMA program would increase the Fed’s balance sheet, historically a positive signal for Bitcoin valuations
• Hayes favors Bitcoin, Ether, and Ethena (ENA) as prime opportunities if dollar liquidity expands significantly

A coordinated effort between Washington and Tokyo appears to be underway to strengthen Japan’s currency. Treasury Secretary Scott Bessent has openly advocated for broadening a Federal Reserve mechanism that would enable Japan to exchange its US Treasury positions for dollars, subsequently deploying those funds to purchase yen in foreign exchange markets.

This mechanism is the FIMA Repo Facility. Currently, it restricts individual counterparties to $60 billion in active loans. Bessent’s proposal calls for eliminating this ceiling and broadening eligibility to encompass major Japanese financial entities, particularly the Government Pension Investment Fund, or GPIF.

The Yen’s Prolonged Decline

The yen’s extended weakness began with Abenomics in 2012. Under former Prime Minister Shinzo Abe, the Bank of Japan embarked on unlimited yen printing to purchase government debt through a strategy known as yield curve control. The objective was currency depreciation to enhance export competitiveness.

The strategy succeeded. The yen depreciated by over 50% during the subsequent ten years. This devalued currency became the preferred financing vehicle globally. Traders borrowed cheaply in yen, invested in higher-return assets denominated in dollars and euros, and captured the spread.

Implications of FIMA Expansion

Should the Fed’s Foreign Currency Subcommittee, now led by Fed Chair Kevin Warsh, eliminate the FIMA ceiling, Japan could leverage up to $1.37 trillion worth of US Treasury securities. This comprises $1.14 trillion controlled by the Japanese government plus $230 billion managed by GPIF.

The Federal Reserve would create new dollars to finance these transactions. This 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 leadership, will align with political guidance from the Trump administration.

Alternative paths to yen strengthening remain problematic for Japan. Pursuing aggressive interest rate increases would devastate the market value of Japanese government bonds already on the BOJ’s books, generating substantial unrealized losses. In July 2024, an unexpected BOJ rate adjustment drove the yen from 160 to 140 within days, while both the Nasdaq and Nikkei plunged over 10%. The BOJ promptly reversed course.

The alternative approach—forcing Japanese institutions to divest US equities and bonds to repatriate capital—remains politically untenable. Japan’s security relies on American military guarantees, and a wholesale liquidation of US holdings would undermine Treasury and equity markets that underpin American global power.

Therefore, FIMA expansion represents the most viable solution.

Cryptocurrency Investment Strategy

Hayes confirms Bitcoin remains a foundational holding. For anticipated upside, he identifies Ether as the preferred large-cap alternative, noting it’s the only major cryptocurrency that failed to achieve new all-time highs in 2025.

He also spotlights Ethena, trading under ticker ENA, as a speculative opportunity. ENA has declined over 90% from peak levels. Its stablecoin USDe has experienced a 75% contraction in supply as Bitcoin basis yields compressed. Hayes suggests even modest Bitcoin price recovery could elevate USDe yields and attract renewed capital, potentially driving ENA gains of 5x.

Hayes has not yet fully established these positions and is awaiting official confirmation of FIMA rule modifications.

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