How could the strengthening of the Japanese yen by 6.3% against the dollar over the past 40 days affect the crypto market?
The answer may lie in carry trade—a strategy that investors have been using for years around the world. The idea is simple: borrow money in Japan at a very low interest rate, convert it into dollars, and invest in assets with higher returns—U.S. stocks, bonds, and cryptocurrency.
But now the situation is changing. The yen is strengthening rapidly, and markets are already pricing in nearly 100% a rate increase by the Bank of Japan at its meeting on September 17–18. For those who borrowed yen, this is a double hit: loans become more expensive, and repaying the yen-denominated debt becomes more costly in dollar terms. As a result, some traders may start unwinding the carry trade: selling risky assets, converting dollars back into yen, and paying off Japanese loans.
And crypto is one of the most risk-heavy segments of the market. So, a strengthening yen could potentially mean an outflow of liquidity from the crypto market. And here’s the key nuance: the BOJ rate hike itself is already almost fully reflected in prices. More dangerous for $BTC could be an unexpectedly hawkish signal from the Japanese central bank or further rapid strengthening of the yen.
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The answer may lie in carry trade—a strategy that investors have been using for years around the world. The idea is simple: borrow money in Japan at a very low interest rate, convert it into dollars, and invest in assets with higher returns—U.S. stocks, bonds, and cryptocurrency.
But now the situation is changing. The yen is strengthening rapidly, and markets are already pricing in nearly 100% a rate increase by the Bank of Japan at its meeting on September 17–18. For those who borrowed yen, this is a double hit: loans become more expensive, and repaying the yen-denominated debt becomes more costly in dollar terms. As a result, some traders may start unwinding the carry trade: selling risky assets, converting dollars back into yen, and paying off Japanese loans.
And crypto is one of the most risk-heavy segments of the market. So, a strengthening yen could potentially mean an outflow of liquidity from the crypto market. And here’s the key nuance: the BOJ rate hike itself is already almost fully reflected in prices. More dangerous for $BTC could be an unexpectedly hawkish signal from the Japanese central bank or further rapid strengthening of the yen.
#UkrainianContent