Why did Bitcoin sell off as the yen surged fast enough to trigger cuts across risk books?

Bitcoin's price can be affected by movements in the Japanese yen, specifically through a 'yen-funded carry unwind' where traders borrowing in yen to invest in other assets are forced to close positions when the yen strengthens rapidly. This is because a fast-moving USD/JPY exchange rate can trigger margin calls and Value at Risk (VAR) cuts, leading to deleveraging across portfolios, including Bitcoin, due to its relatively lower liquidity. Japanese FX officials' increased emphasis on monitoring and potential intervention further exacerbates this sensitivity. The Bank for International Settlements (BIS) data indicates a substantial amount of yen-denominated loans outside Japan, highlighting the potential for significant impact on global risk conditions. This deleveraging manifests in crypto markets through repricing of perpetual funding rates, compressed basis, declining open interest, wider spreads, and increased correlation with other risk assets like equities. Recognizing this pattern involves monitoring USD/JPY movements, cross-asset volatility, credit stress, crypto market internals, and ETF flows.

(Source：CryptoSlate)