Bitcoin Under Pressure As Yen Carry Trade Unwind Hits Global Markets
The yen carry trade, a strategy where investors borrow cheaply in Japan and invest in higher-yielding US assets, is unwinding as Japan raises rates and the Fed eases. This “infinite money glitch” worked for decades by exploiting near-zero Japanese rates against higher US yields. Now, narrowing rate differentials and yen strengthening are forcing investors to unwind positions, selling US assets to repay yen loans—a process that drains global liquidity. This liquidity drain can trigger sharp volatility, particularly in risk assets like Bitcoin, which often reacts first to leverage reversals and forced selling. Meanwhile, the Fed is pivoting away from tightening—having cut rates and begun new Treasury purchases, effectively restarting monetary stimulus. This creates a dynamic where Bitcoin faces short-term downside from de-leveraging and possible longer-term upside from renewed liquidity. Despite volatility, Bitcoin’s price historically finds support near the “electrical cost” of mining, recently around $71,000, suggesting potential buy opportunities if prices drop near that level. As of the report, Bitcoin trades at $87,082.
