Hedge funds have taken a big bearish stance against the Japanese yen, with around 85,000 net short contracts as the currency faces increasing pressure. The yen stress has caused Bitcoin to drop below $87,000, wiping out approximately $527 million in long positions in just 24 hours. This is part of a larger macro story involving rising Japanese bond yields, changing central bank policies, and a significant yen carry trade that impacts the crypto market.
The yen carry trade, where investors borrow yen at low rates to buy higher-yielding assets elsewhere, has grown to around $500 billion since 2011. Analysts estimate that about $200 billion of this trade has already unwound in recent weeks, affecting various markets including stocks, bonds, and cryptocurrencies. The unwinding of these trades can lead to increased volatility in different asset classes, including Bitcoin.
Rising Japanese government bond yields, which reached around 1.84% for the 10-year JGB, triggered a multi-asset sell-off and over $640 million in crypto liquidations. As yields increase, traders tend to move their investments from riskier assets like altcoins and meme coins to safer traditional assets. This shift in investment strategy can impact the crypto market and lead to increased volatility.
The Bank of Japan’s actions regarding rates and bond-buying can significantly influence the cryptocurrency market. Any aggressive tightening by the BOJ or spikes in bond yields could result in unexpected volatility in the crypto market. Global macroeconomic factors play a crucial role in shaping short-term trends in cryptocurrencies like Bitcoin.
Traders should be cautious about using leverage or margin trading during periods of macroeconomic uncertainty, as this can amplify losses when unexpected events occur. Diversifying your investment portfolio with assets like cash, gold ETFs, or other hedges can help mitigate risks during volatile market conditions. Understanding macroeconomic indicators and their impact on the crypto market is essential for making informed investment decisions.
Stay informed about macroeconomic developments such as changes in central bank policies or currency movements, as these factors can influence the cryptocurrency market. By focusing on proper risk management, avoiding excessive leverage, and maintaining a long-term investment perspective, investors can navigate through macroeconomic storms without succumbing to significant losses. Keeping abreast of global economic news alongside crypto-specific updates is crucial for a well-rounded investment strategy.
Read more at Yahoo Finance: Why Crypto Holders Feel the Shock