The wave of US Treasury selling may trigger the Fed to print money, and the crypto market is expected to welcome a new bull run.

Against the backdrop of global economic turmoil and fluctuations in the financial markets, the Japanese banking system faces significant challenges brought about by the Fed's interest rate hike cycle. The fiscal and monetary policies of the United States have had a profound impact on the global market, forcing Japanese commercial banks to reassess their foreign exchange hedging strategies for U.S. Treasury investments.

As the interest rate differential between the US and Japan widens, the cost of foreign exchange hedging rises, forcing the Bank of Japan to sell US Treasury bonds. Japan Agricultural and Forestry Corporation was the first to announce the sale of $63 billion in US and European bonds, and other Japanese commercial banks may hold up to $850 billion in foreign bonds. This large-scale dumping could lead to a surge in US Treasury yields.

To address this situation, the U.S. Treasury Secretary may ask the Bank of Japan to purchase these bonds and utilize the FIMA repo mechanism established by the Fed in March 2020. This mechanism allows central banks to pledge U.S. Treasury securities to obtain overnight dollars, thereby increasing global dollar liquidity. This could have a positive impact on Bitcoin and the crypto market.

The main reason for the Bank of Japan's sell-off of U.S. Treasury bonds is the rising cost of foreign exchange hedging. With the Fed raising interest rates, the interest rate differential between the dollar and the yen has significantly widened, causing the hedging costs to exceed the bond yields. Even if the Fed may cut interest rates in the future, a small cut will not be able to adequately alleviate this issue.

To avoid a surge in US Treasury yields, the US government may encourage the Bank of Japan to use the FIMA repo mechanism to absorb the supply of these bonds. This will increase the supply of dollars and may bring a new round of bull run to the crypto market.

In the current situation, investors may consider gradually shifting funds from high-yield stablecoins to crypto risk assets. The predicament of the Japanese banking system may bring new dollar liquidity support to the crypto market, becoming another factor driving the bull run.