On Friday the New York Fed ran a rate check that signaled possible U.S.-Japan intervention to support the yen, according to a report. The move followed a sharp sell-off that pushed Japan’s 40-year government bond yield to about 4.2% after Prime Minister Sanae Takaichi proposed tax cuts.
Decades of near-zero Japanese rates enabled the carry trade, where investors borrow cheap yen to buy higher-yielding foreign assets including Bitcoin. A coordinated effort to strengthen the yen would force rapid reversals as traders buy back yen and close leveraged positions, and investors grew worried after the rate checks, as reported.
Tim Sun of HashKey Group said the dynamic is already hitting crypto markets. “Rising expectations of intervention directly lifted the volatility premium, sharply increasing the cost of holding leveraged positions. This, in turn, forced capital to exit Bitcoin.”
Some analysts warned the immediate impact would be downward pressure on risk assets, while the longer-term effect could boost scarce assets if dollar liquidity expands through Fed actions. Arthur Hayes described the scenario as “Very boolish if true for $BTC.” in a tweet.
Year-to-date Bitcoin has barely moved, up roughly 0.14% by market data, after a 2024 carry-trade blowup briefly pushed prices below $50,000 and triggered over $1 billion in liquidations.
