$500B Yen Carry Trade Is Breaking: Why $BTC Needs to Watch the BOJ 🚨
The Bank of Japan is signaling a rate hike, placing the massive Yen Carry Trade under severe pressure. This strategy, where institutions borrow cheap Yen to invest in higher-yielding assets like US stocks and cryptocurrencies, is rapidly losing its edge.
While an estimated $500 billion of this trade still exists, the economics are collapsing. Japanese government bond yields are at 18-year highs, meaning capital is no longer forced overseas. Furthermore, the high cost of hedging the USD/JPY exchange rate—around 2% annually—is wiping out the profit margin, especially when compared to the US 10-year yield (currently 4.18%).
If the BOJ Governor adopts a hawkish tone this week, investors will rush to liquidate positions. The critical risk for the broader market is the resulting decreased demand for US bonds. This forces US yields higher to remain competitive, tightening global liquidity and putting downward pressure on risk assets like $ETH. The era of cheap Yen funding is ending. 📉
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