Bitcoin's Potential Benefit from US Banking Crisis and Rising Yields on Treasury Bonds

Introduction

BitMEX co-founder Arthur Hayes believes that Bitcoin (BTC) could see positive effects from a potential crisis in the US banking system. Hayes points out that the US banking crisis is resurfacing, with banks like Manufacturers and Traders (M&T) Bank facing insolvency issues due to their high exposure to commercial real estate (CRE) in their loan portfolios.

The Impact of CRE Loans

Hayes highlights that M&T Bank's CRE loans make up 34% of their total loan book. A 20% loss on these loans would result in a 36% reduction in total equity capital, breaching capital adequacy ratios and necessitating a bailout. As the 20th largest bank in the US, M&T Bank's vulnerability is evident, and the market is likely to respond accordingly.

Rising Yields on US Treasury Bonds

Hayes also emphasizes that rising yields on the 10-year US treasury bond will add more stress to the US banking system. This, in turn, could benefit Bitcoin as it would force the Federal Reserve to print money to bail out banks. Hayes attributes the increasing yields to the actions of China and Japan, the world's second and third-largest economies.

The Role of China and Japan

Hayes explains that both China and Japan are committed to weakening their currencies, which will have disastrous consequences for US Treasury bond holders. As the Japanese yen weakens, the yields on 10-year US treasury bonds rise. Japan can control the pace of devaluation by selling its holdings of treasuries, which puts upward pressure on yields. If Japan weakens, China will also have to weaken its currency to compete for global exports. The Chinese yuan is currently overvalued by approximately 10% compared to the Japanese yen. China manages the speed of yuan weakening by selling US treasuries and liquidating its dogshit bonds, further increasing yields.

Conclusion

In conclusion, Arthur Hayes believes that Bitcoin could benefit from a potential crisis in the US banking system. The vulnerability of banks like M&T Bank, coupled with rising yields on US treasury bonds, creates an environment where the Federal Reserve may need to print money to bail out banks. The actions of China and Japan in weakening their currencies contribute to the rising yields. Investors should consider these factors when making high-risk investments in Bitcoin, cryptocurrency, or digital assets.