If the Federal Reserve cuts interest rates in December while the Bank of Japan raises rates, the interest rate differential between the US and Japan will quickly narrow.
A stronger yen and a weaker dollar will suddenly make the arbitrage trades that have relied on the "cheap yen" for years become expensive, significantly increasing carrying costs.
This will force investors to close their positions: sell assets and cover yen positions.
Japan has long been the easiest source of cheap funding globally, but it may now become the trigger point for global volatility.
The last time yen carry trades unwound on a large scale, Bitcoin formed a significant bottom against the backdrop of liquidity being pulled from risk assets.
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