Yen Carry Trade Collision: Bank of Japan’s Rate Shock Aims at Bitcoin | US Crypto News

Welcome to the US Crypto News Morning Briefing—your essential rundown of the most important developments in crypto for the day ahead.

Grab a coffee as global markets quietly shift with Japan’s bond yields surging and the BoJ hinting at a rate hike. The decades-long yen carry trade, which fueled stocks, crypto, and risk assets, could be unraveling faster than anyone expects.

Crypto News of the Day: Bitcoin Braces as BoJ May End Decades of Cheap Money

Global markets are bracing for a potential macro shock as the Bank of Japan (BoJ) prepares for its December 18–19 monetary policy meeting.

Traders now price a 90% chance of a 25 basis point rate hike, following signals from BoJ Governor Kazuo Ueda and persistent inflation above 2%.

Japan’s 2-year government bond yield has climbed above 1%, its highest since the 2008 Global Financial Crisis, while the 10-year JGB hit a 17-year high, highlighting rising borrowing costs.

Why the Yen Carry Trade Matters

For nearly three decades, the yen carry trade fueled global risk-taking. Investors borrowed yen at ultra-low rates, converted it to dollars, and deployed capital into higher-yielding assets, including US stocks, bonds, and cryptocurrencies like Bitcoin.

When Japan raises rates or the yen strengthens, this trade unwinds violently, forcing rapid asset sales.

The consequences are not hypothetical: in August 2024, a BoJ hike triggered a $600 billion crypto market wipe, including Bitcoin falling to $49,000 and $1.14 billion in liquidations. Analysts warn that a similar scenario could repeat if Japanese yields rise further.

Besides Paul Barron, analyst Great Martis also calls the BoJ hike a potential “canary in the coal mine” for crypto and global markets.

“When the reckless BOJ is forced to raise rates, the yen carry trade will begin to unwind, causing market turmoil. Canary in the coal mine,” Martis wrote in a post.

Meanwhile, early signs of stress are emerging, as hedge funds and institutional investors closely monitor the simultaneous tightening of liquidity in Japan, the US, and China. This rare convergence could accelerate deleveraging.

Nonetheless, counterpoints exist. Analyst Negentropic notes that most leverage has already been flushed since October. In the same tone, Bob Elliot argues the yen carry trade is largely muted.

Yet even modest unwinding could pressure highly leveraged crypto positions and risk assets globally.

If QE Is Not the Immediate Solution, What’s Next for Bitcoin and Global Risk Assets?

Nic Puckrin, co-founder of Coin Bureau, emphasizes that quantitative easing (QE) historically follows a crisis, not routine rate adjustments.

The current tightening in Japan, the US, and China suggests that markets may face further drawdowns before any liquidity support arrives. Investors betting on easy money could face sharper-than-expected volatility.

Crypto markets are often the first to absorb funding shocks, making Bitcoin and Ethereum bellwethers for liquidity stress.

With the BoJ’s rate decision looming, traders should monitor:

• JGB yields,
• USD/JPY levels, and
• Leveraged positions.

If Japan continues tightening, global deleveraging could persist into 2026, testing the resilience of both crypto and traditional markets.

The era of free Japanese money appears to be coming to an end. Markets now face a higher-volatility environment, where fundamental value may replace cheap leverage as the main driver of asset prices.

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