Arthur Hayes, co-founder of BitMEX and chief investment officer of Maelstrom, is watching the euro–yen exchange rate as a potential warning signal for stress in Europe’s financial system and tighter U.S. dollar funding conditions. Hayes has projected EUR/JPY could fall to 140 or below by June 2027 from roughly 185, a move that would mark a sharp reversal in a currency pair often used to express global risk appetite and interest-rate differentials.
His thesis combines pressure on French government finances, possible capital repatriation to Japan, and the role of large French banks in U.S. short-term funding markets. Hayes also said he expects U.S. liquidity conditions to prompt more Federal Reserve Treasury-bill purchases, an outlook that underpins Maelstrom’s long-term Bitcoin exposure and its shorter-term positions in Ether, Ethena and Ether.fi.
Hayes attributed part of the anticipated euro weakness to a “sell euros, buy yen” policy approach by U.S. Treasury Secretary Scott Bessent through the Exchange Stabilization Fund. The Treasury fund can be used for foreign-exchange operations, although Hayes presented the proposed intervention as part of his market scenario rather than a publicly announced policy.
France sits at the center of Hayes’s euro thesis
France is the weakest point in Hayes’s argument about a potential euro-area funding shock. He said the country’s position within the Eurosystem has deteriorated substantially since 2021, citing European Central Bank Target2 payment-system balances.
Target2 records cross-border payments between euro-zone central banks. Persistent deficits can indicate that deposits and other funds are moving from banks in one member state to institutions elsewhere in the currency union. Hayes said France has shifted from being a net creditor in the system to its largest net debtor, reflecting an outflow of funds from French banks toward other euro-area jurisdictions.
French sovereign bonds have also moved from a relative strength to a relative weakness among the major euro-zone issuers Hayes compared. He said the spread between 10-year French government bonds, known as OATs, and German bunds reached 85 basis points in late August 2026, its widest level since the euro-area debt crisis of 2011.
Hayes cited a 10-year French yield of 4.25% and August euro-zone inflation of 3.3%. The combination places France in a more difficult fiscal position: higher yields raise the cost of refinancing debt, while inflation limits the political room for aggressive spending restraint.
France’s government spending amounts to about 60% of gross domestic product, according to Hayes, with only Finland recording a higher state share among the countries he referenced. France also carries roughly €3 trillion in public debt, and Hayes said foreign holders own around 60% of that total. He added that foreigners hold about 71% of French bank debt.
That ownership structure leaves French markets more exposed to a change in overseas demand. If foreign institutions reduce holdings of French sovereign or bank debt, yields could rise further while domestic banks face a more expensive funding environment.
A domestic response could strain the monetary union
Hayes outlined a scenario in which the European Central Bank declines to deploy its Transmission Protection Instrument, a program designed to counter disorderly moves in government-bond yields that interfere with monetary-policy transmission across the euro area.
Without ECB support, he argued, France could face pressure to stabilize its own government and banking markets through the Banque de France. His proposed mechanism would involve central-bank purchases of French government and bank debt financed through reserve creation, coupled with capital controls intended to limit deposit and investment outflows.
Such measures would amount to an internal devaluation, in Hayes’s view. France would remain within the euro, but restrictions on capital movement and preferential domestic support could weaken the practical value of euro deposits and assets held inside the French financial system relative to those held elsewhere in the monetary union.
The prospect of such fragmentation helps explain why Hayes sees EUR/JPY as more than a standard foreign-exchange trade. A fall from around 183.78 to 140 would imply a sizeable unwind in positions that borrow or fund in low-yielding yen while holding higher-yielding assets abroad.
Japanese repatriation and U.S. repo funding
Hayes also pointed to comments from Japanese finance ministry official Katayama on July 10 urging Japanese corporations to repatriate capital. Japanese institutions have long been major buyers of overseas bonds and credit instruments, making any shift back toward domestic yen assets consequential for European funding markets.
Around that period, Hayes noted, France’s 10-year OAT yield rose by 0.38 percentage points, compared with a 0.22-point increase in the U.S. 10-year Treasury yield. The divergence suggested French borrowing costs were rising faster than the broader move in global sovereign yields.
His argument then extends across the Atlantic through the U.S. repurchase-agreement market, or repo market, where institutions borrow cash overnight using securities as collateral. The U.S. Treasury Office of Financial Research monitors BNP Paribas, Crédit Agricole and Société Générale as significant participants; Hayes said the three banks together provide about 20% of lending in the U.S. repo market.
If those banks pulled liquidity back to support operations in France or Europe, repo rates could rise relative to the Secured Overnight Financing Rate, the principal benchmark for dollar funding secured by Treasuries. Higher repo rates have previously prompted close attention from the Federal Reserve because they can disrupt the plumbing used by banks, hedge funds and government-bond dealers.
Hayes said the New York Fed’s Reserve Management Purchases have increasingly favored Treasury bills, estimating that the central bank is monetizing 39% of T-bill issuance, up from zero at the end of 2024. He argued that a sharper repo-market squeeze could push the pace of balance-sheet expansion toward $100 billion a month.
Crypto positioning rests on a liquidity bet
Hayes’s market positioning reflects the assumption that a U.S. funding disruption would lead to faster central-bank liquidity provision. Maelstrom maintains a structural long allocation to Bitcoin, he said, while its shorter-term focus is on Ether, with a target of $10,000, Ethena at $0.50 and Ether.fi at $2.
Those targets are conditional on Hayes’s expectation of expanding dollar liquidity rather than on a direct link between French bond spreads and token prices. His EUR/JPY forecast is effectively a macro dashboard for that chain of events: euro-area stress could pressure French banks, reduced repo lending could tighten dollar funding, and the Federal Reserve could respond through larger purchases of short-term Treasuries.
The trade carries several points of failure. The ECB could intervene to contain French spreads, Japanese capital may not return home at the scale Hayes anticipates, and French banks could maintain their U.S. repo activity despite domestic market volatility. But the widening France-Germany yield gap and the focus on EUR/JPY place a traditionally niche European credit concern closer to the center of global crypto liquidity analysis.
For macro traders linking FX stress to crypto liquidity, explore our forex guide and crypto primer today.
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