The Federal Reserve stands ready to intervene in currency markets. Fed selling U.S. dollars to buy Japanese yen marks a historic shift. This would be the first such intervention this century.
The New York Fed has completed rate checks already. Rate checks represent the final step before actual intervention begins. The process signals serious intent from U.S. monetary authorities.
According to ">Bull Theory on X, the preparation phase typically precedes real market operations. Markets now await coordinated action between America and Japan. The mechanism involves creating new dollars through the central bank's balance sheet.
Why Japan's Solo Efforts Keep Failing
Japan faces mounting economic pressure on multiple fronts. The yen has remained weak for years. Japanese bond yields have reached multi-decade highs. The Bank of Japan maintains a hawkish stance.
These factors create stress beyond Japan's borders. Global markets feel the impact. Central banks now treat the situation with urgency.
Japan attempted solo interventions in 2022 and 2024. Both efforts failed to stabilize the currency. Even July 2024's intervention produced only temporary results. History proves Japan cannot fix this alone.
Coordinated Action Changes Everything Fast
The 1998 Asian Financial Crisis demonstrated this clearly. Japan's independent interventions failed completely. U.S. participation changed the outcome immediately. The yen stabilized once coordinated action began.
The 1985 Plaza Accord provides an even stronger example. Coordinated intervention pushed the dollar down nearly 50% over two years. Bull Theory notes that dollar weakness triggered massive rallies. Gold surged. Commodities pumped. Non-U.S. markets exploded higher.
Fed selling U.S. dollars follows a specific mechanism. New dollars get created through the central bank's balance sheet. Those dollars get sold in currency markets. The proceeds buy yen from Japan.
This process weakens the dollar deliberately. Global liquidity increases as a result. Asset prices typically surge when dollar weakness occurs intentionally.
Crypto Faces Short Pain, Long Gain
Bitcoin shows one of the strongest inverse correlations with the dollar. The yen correlation sits near record highs currently. This creates a complex setup for cryptocurrency markets.
Hundreds of billions remain tied to the yen carry trade. Investors borrow cheap yen to buy stocks and crypto. Sudden yen strength forces rapid unwinding of these positions.
August 2024 illustrated this dynamic perfectly. A small Bank of Japan rate hike sent the yen higher. Bitcoin crashed from $64,000 to $49,000 in six days. The crypto market lost $600 billion in total value.
Short-term yen strength creates immediate risk for digital assets. Long-term dollar weakness creates sustained upside potential. Bitcoin trades well below its 2025 peak currently.
Most major assets have already repriced for currency debasement. Bitcoin has not fully adjusted yet. If coordinated intervention materializes and the dollar weakens, capital will seek undervalued assets.
Crypto historically benefits strongly from this environment. Bull Theory emphasizes this setup could become the most important macro development of 2026. Fed selling U.S. dollars would increase global liquidity substantially. That liquidity typically flows into alternative assets seeking higher returns.
