Federal Reserve Chair Jerome Powell’s recent announcement of potential interest rate cuts might seem like a golden opportunity for Bitcoin and tech stocks to surge. But according to BitMEX co-founder Arthur Hayes, this move could set the stage for a financial disaster that no one sees coming.

In a fiery blog post, Hayes sounded the alarm on the looming threat posed by the Fed, Bank of England, and European Central Bank’s anticipated rate cuts. “We’re ignoring a ticking time bomb,” Hayes warned. “These cuts will shrink the interest rate gap between major currencies and the yen, reviving the dreaded yen carry trade unwind that could send markets into a tailspin.”

**The Yen Carry Trade: A Silent Killer**

The yen carry trade—a strategy where investors borrow cheap yen to invest in high-flying US stocks and bonds—has long been a moneymaker. But it’s a double-edged sword. When Japan’s policies shift, this trade can wreak havoc on global markets.

The proof? Just look at what happened on August 5. After the Bank of Japan announced a surprise rate hike to fight inflation at the end of July, investors went into panic mode. They dumped their US assets to cover skyrocketing yen loan costs, leading to a global market meltdown. Japan’s Nikkei and Topix indices plunged over 12%—their worst crash since 1987—while the S&P 500 and Nasdaq nosedived by 4.2% and 6.3%, respectively. And let’s not forget Bitcoin and Ethereum, which saw gut-wrenching drops of 15% and 20%.

Even though the BoJ eventually backed off from further rate hikes, Hayes isn’t convinced the danger has passed. A sudden yen surge against the dollar could still spell disaster. “If the yen strengthens, yen carry trade investors will be caught in a vicious trap, forced to repay their loans with a weaker dollar—leading to massive losses,” Hayes cautioned.

The yen’s initial rise following the BoJ’s rate hike is a harbinger of what could happen when US rates start to fall. “If cutting rates in three of the world’s biggest economies boosts the yen, brace yourselves. The market reaction could be brutal,” Hayes warned. With trillions of dollars in global assets tied up in yen-financed trades, the stakes couldn’t be higher.

**A High-Stakes Gamble**

If the yen carry trade unravels, Hayes predicts the Federal Reserve will be forced to act fast to avoid a market collapse. First on the agenda? Ending the Fed’s balance sheet reduction—quantitative tightening—and pumping liquidity back into the system by reinvesting in US treasuries.

But if that’s not enough, the Fed might take it a step further, firing up the money printers and unleashing a new wave of quantitative easing. Meanwhile, the US Treasury could dip into its $740 billion war chest to flood the market with cash.

The catch? All this could supercharge inflation, turning up the heat on the economy. But for Bitcoin—a scarce asset immune to inflation—this scenario could be the perfect storm for a meteoric rise. “If the Fed throws the kitchen sink at this, Bitcoin could shoot straight to the moon,” Hayes proclaimed.

Get ready. The financial world is about to get a lot more interesting.