BitMEX co-founder Arthur Hayes said in a Sept. 3 column that the euro-yen exchange rate, or EURJPY, is now the "North Star" of his macro trading framework. He expects the pair to fall from around 185 to 140, or even lower, by June next year.
Hayes argued that a drop in EURJPY would be more than a currency move. In his reading, it would act as an early signal that risks are building in the French banking system and that an expansion in U.S. dollar liquidity is getting closer.
How Hayes maps the liquidity chain
Hayes described the thesis as a full liquidity chain with several linked stages.
The first stage centers on France. He said France is one of the most vulnerable parts of the eurozone because of its high fiscal deficit, rising government debt, and dependence on foreign capital. In his view, both French banks and the French sovereign bond market are facing continued capital outflow pressure.
The second stage is capital repatriation by Japanese companies. Hayes said U.S. Treasury Secretary Scott Bessent is using policy to encourage the return of capital from Japan and other Asian countries, pushing Japanese firms to bring overseas assets back home more quickly. That, he wrote, would support the yen and lead Asian investors to reduce exposure to European assets.
The third stage would hit repo funding. Hayes said that as French sovereign debt and bank liabilities come under selling pressure, France’s global systemically important banks could scale back their activity in the repo market. If French banks retreat from part of that market, U.S. Treasury financing costs would rise and hedge funds could be forced to deleverage.
At the end of that chain, Hayes expects the New York Fed to expand its repo market operations, or RMP, and said the pace of Federal Reserve balance sheet expansion could accelerate to nearly $10 billion a month. He described the sequence as a path of tightening first, followed by renewed money printing.
EURJPY as an early signal for dollar liquidity
Hayes said the importance of EURJPY goes beyond foreign exchange positioning. He called the pair a leading indicator for both rising risk in French banks and a coming expansion in dollar liquidity.
Based on that view, he said investors should watch EURJPY put options while maintaining a structural long position in Bitcoin.
He also said the Federal Reserve has already bought 39% of short-term Treasuries through the RMP mechanism, a sharp increase from what he described as a near-zero base at the end of last year. If repo market stress intensifies, Hayes wrote, the speed of Fed money creation would only increase.
Crypto seen as one of the first beneficiaries
Hayes said crypto assets are among the fastest beneficiaries of an expansion in Federal Reserve liquidity. He repeated his price targets for the end of 2026:
- Ethereum (ETH): $10,000
- Ethena (ENA): $0.5
- Ether.fi (ETHFI): $2
With Ethereum trading at about $4,300 in the report, a move to $10,000 would imply roughly 132% upside.
The report also noted that Hayes said in July he had dropped Hyperliquid’s native token HYPE and shifted to accumulating ETH. In the latest column, he added a clearer target price and time frame.
Broader backdrop: a stronger yen and pressure in Treasuries
Hayes’ thesis was presented alongside recent yen strength. The report said Japan carried out a record $96.4 billion currency support operation in August, yet USD/JPY was back above 160 in less than a month. According to the article, Bessent’s exchange-rate strategy is driving Asian capital repatriation, lining up with Hayes’ projected path for EURJPY.
The report also pointed to growing supply-demand strain in the U.S. Treasury market. Bridgewater Associates founder Ray Dalio recently warned that the Treasury market is nearing a breaking point in what he called the "big debt cycle," with a turning point expected in 2027.
As presented by BlockTempo, Dalio’s warning and Hayes’ liquidity view reinforce each other on one point: Federal Reserve balance-sheet expansion may be approaching, and crypto assets could be among the first to benefit.