Yen Carry Trade Collision: Bank of Japan’s Rate Shock Aims at Bitcoin | US Crypto News
The Bank of Japan's potential rate hike threatens to unwind the decades-long yen carry trade, potentially causing significant volatility in Bitcoin and other risk assets.Summary
Global markets, especially risk assets like Bitcoin, are bracing for impact as the Bank of Japan (BoJ) signals a potential rate hike at its December meeting, with traders pricing in a 90% chance of a 25 basis point increase. This move targets the end of decades of cheap money that fueled the yen carry trade—where investors borrowed cheap yen to invest in higher-yielding assets globally. The unwinding of this trade could be violent; a previous BoJ hike in August 2024 reportedly caused Bitcoin to crash to $49,000 and wiped $600 billion from the crypto market. Analysts view the potential hike as a 'canary in the coal mine' for market turmoil, although some counter that much leverage has already been flushed out. The convergence of tightening liquidity in Japan, the US, and China suggests potential ongoing deleveraging, meaning fundamental value, rather than cheap leverage, may soon drive asset prices.
(Source：BeInCrypto)