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🏦 Traditional Finance Doubles Down
The line between traditional finance and crypto continues to blur with major moves this week:
Bank of Canada's Bitcoin Bet: The National Bank of Canada made a substantial indirect move into Bitcoin by acquiring 1.47 million shares of MicroStrategy, a position valued at roughly $273 million.Wall Street's New Advice: In a significant shift, Bank of America is now advising its wealth management clients to consider allocating 1% to 4% of their portfolios to cryptocurrency, with formal recommendations for Bitcoin ETFs starting in January 2025.Banks and Crypto Pilots: Coinbase CEO Brian Armstrong confirmed the company is working with several major U.S. banks on pilot programs for stablecoins, custody, and trading, further signaling traditional finance's growing involvement.
⚖️ Regulatory Clarity Advances Globally
Two major economies took concrete steps to formalize their crypto frameworks:
UK Grants Legal Property Status: The United Kingdom passed a law formally classifying cryptocurrencies as legal property. This provides clear rules for ownership, inheritance, and recovery in legal disputes.South Korea's Stablecoin Blueprint: South Korea is progressing with legislation that would require stablecoin issuers to be bank-led consortiums, with banks holding at least a 51% ownership stake.
🔄 Leadership and Security Shifts
New Leadership at Binance: Yi He, a company co-founder, has been named Co-CEO alongside Richard Teng as the exchange approaches 300 million users.Upbit's Security Overhaul: Following a security breach, the South Korean exchange Upbit is forcing all users to generate new deposit addresses as it rebuilds its wallet system from the ground up.
📉 A Cautious Market Outlook
Despite institutional progress, market sentiment remains nervous. The Crypto Fear & Greed Index is at 21, indicating "Extreme Fear," a significant improvement from a record low of 10 hit after a major market drop in October. Analysts are divided on whether this is a mid-cycle reset or the start of a bear market.
The week ends with traders watching key central bank decisions—with potential rate cuts from the U.S. Federal Reserve and hikes from the Bank of Japan—that could pull global liquidity in different directions.

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Bitcoin is running into a new macro headwind as Japan’s bond yields jump to levels not seen in years, fueling bets that the Bank of Japan could deliver another rate hike — a move that threatens to unwind yen carry trades and trigger risk-off flows across crypto. Markets now assign nearly a 90% probability to a 25 bps hike at the BOJ’s December 18–19 meeting, a scenario that recalls the painful August sell-off when BTC slid to around $49,000.
Japan’s Rates Surge & Yen Strengthen
Japan’s 2-year bond yield has pushed above 1%, its highest point since 2008. The 10-year JGB has climbed to a level not seen in 17 years. These jumps reflect growing conviction that policymakers will continue normalizing rates after years of ultra-easy monetary policy.
Stronger economic data has also lifted the yen, which rebounded from just over ¥155 per dollar to roughly ¥154.56. That appreciation matters: it weakens the math behind yen carry trades, where investors borrow cheaply in yen and deploy the capital into higher-yielding or riskier assets like Bitcoin.
Why the Yen Carry Trade Is a Direct Threat to BTC
With Japan’s policy rate at 0.5% versus 4.75% in the U.S., borrowing in yen has been an attractive way to leverage into risk assets. When the yen was weak, these trades were even more profitable — fewer dollars were needed to repay the debt.
But rising Japanese rates and a stronger yen flip the trade on its head. As the yen appreciates, the cost of maintaining or unwinding carry trades rises sharply. That often forces investors to sell risk assets to settle yen liabilities — Bitcoin included.
A Flashback to August’s Meltdown
This isn’t a hypothetical risk. In August 2024, the BOJ raised rates for the first time in a decade, setting off a violent market reaction. Roughly $600 billion evaporated from the crypto market as BTC plunged from the mid-$60Ks to about $49,000 within a week. Roughly $1.14 billion in leveraged positions were liquidated during the rout.

It was a stark reminder of how quickly crypto can unravel when carry trades unwind.
Today’s Risks: Liquidity Tightening & BOJ Shock Potential
The yen strengthening now comes at a moment when global liquidity is already narrowing. Hedge funds and macro traders are watching closely, especially after the Fed ended its quantitative tightening program on December 1.
If the BOJ does pull the trigger on a 25 bps hike, the combination of rising Japanese rates, a firmer yen, and tightening global liquidity could deliver a meaningful hit to Bitcoin. The setup mirrors August uncomfortably closely — raising fears that another accelerated sell-off could follow if carry trades begin to unwind again.

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Japan just crossed a financial threshold that few seem to be paying attention to — yet it may be one of the most important turning points in its modern economic history.
The Bank of Japan is now facing ¥32.83 trillion in unrealized losses, the largest paper loss ever seen by a major central bank. For the first time since the global financial crisis, the BOJ’s interest expenses have overtaken its income, meaning the institution can no longer sustain itself under its current structure.

The strain is spilling directly into Japan’s bond market:
The 10-year JGB has surged to nearly 1.9%, a level untouched for almost 20 years.Long-term bonds are moving into new territory, with 30-year yields around 3.4% and 40-year yields above 3.7%.Japan’s bond market has now logged six consecutive years of negative returns — the worst performance among 44 major sovereign debt markets.
The stress isn’t isolated to the BOJ:
Japan’s four biggest insurers are sitting on roughly $67 billion in mark-to-market losses on domestic government bonds.Regional banks have around ¥3.3 trillion in unrealized losses.Analysts estimate banks need about ¥20 trillion in stronger assets to be considered stable — and most regional banks fall far short.
Layer onto this:
Public debt is nearly 230% of GDP, the highest level in the developed world.Inflation has stayed above the BOJ’s target for over 40 straight months.Markets now assign an 80% chance of another rate hike.And the BOJ controls more than half of all outstanding JGBs, making any meaningful unwinding almost impossible without introducing more volatility.
For decades, Japan’s near-zero rates were a key source of cheap global liquidity — the foundation of the carry trade. Now that system is cracking. When the carry trade unwinds, global markets usually feel the pain long before policymakers can respond.
This isn’t a local issue. It marks the slow reversal of one of the most extreme monetary experiments ever conducted — and the fallout could be enormous.

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Japan’s 30-year government bond yield climbed to a new high of 3.445% on Thursday morning, just hours ahead of the Finance Ministry’s ¥700 billion auction of bonds in this maturity range. The results of the sale are expected later today.

Economist Takayuki Miyajima of Sony Financial Group noted that speculation around a December rate hike by the Bank of Japan, combined with concerns over fiscal expansion, has intensified selling pressure across the long end of the curve. However, he added that the elevated yield levels themselves may help to stabilize demand at the auction.

Yields across Japanese government bonds have been trending higher in recent weeks as markets increasingly price in:

A shift away from ultra-loose monetary policy

Rising government borrowing needs

Growing sensitivity to Japan’s long-term fiscal outlook

The move in 30-year yields is being closely watched by global macro traders, as sustained upside pressure in Japanese yields could alter funding dynamics for yen-based carry trades and spill over into broader risk markets.

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