Free Preview
In this paid newsletter I’ll explore the Yen Carry Trade Unwind and go into more depth on the charts over on YouTube. While it may not seem obvious that the value of the Japanese dollar has an outsized effect on the price of Bitcoin, the truth is that this price trend will have rippling effects across finance not just cryptocurrency. Since Bitcoin trades 24/7 it’s one of the first assets to get hit hard when major economic shifts occur and that will only continue as the economy get tighter. JPY/USD has been in a serious downtrend since 2021 and this will continue to put pressure on both the US dollar as well as on Bitcoin.
Since 2019 The Bank of Japan has been raising 10 year Bond yield rates
As Japanese 10 year Bond yields rise - this will force selling of assets like US Treasuries/Stocks (and yes it affects Bitcoin as well)
Japan’s Debt is 2.3X their GDP and this will force them to be more conservative if they’re going to avert a major collapse this decade
The US will likely be forced to buy back the Treasuries that are sold thereby increasing the cost to borrow and reducing demand overall
What does this all mean for Bitcoin?
There is no EXACT estimate for how much money is in the yen carry trade unwind but it’s likely as much as all of the money that’s currently circulating in all of Crypto
Some estimates place the total amount of money locked in the yen carry trade as high as $700 billion which might not sound like a lot but the total Crypto Market Cap right now is only about $2.5 trillion - with Bitcoin itself only holding $1.6 Trillion worth of value at the moment. Now obviously the full weight of the yen carry trade is not placed into Bitcoin but the more US dollars sold to get back into Japanese yen the more pressure it will put on Bitcoin.
If $100 billion dollars gets wiped from this carry trade that could be what actually pushes Bitcoin BELOW this $80K support into the high $70Ks. Long time subscribers know I already believe this outcome is inevitable but the yen carry trade unwind gives us a clue as to WHEN, WHY and HOW it will occur.
MY Perspective
I’ve seen a lot of videos about this yen carry trade unwind this week and wanted to do more research on it myself. As you’ll see in the YouTube video I’m going to dive deep on historical context and technical analysis specifically on the charts because that’s where we see the effect most. It’s pretty clear the Japanese yen is struggling since it’s at levels it hasn’t seen since the late 80s and early 90s - this does not bode well for this unwind trade being quick rather than something that lingers for a while.
The part that really caught my attention is just the fact that Japan is the largest holder of US debt and with them raising the 10 Year Bond Yield rates it’s going to force even more selling of US Treasuries to bring more yen back to the Japanese economy. This is why the Stablecoins Act in the US is becoming so prominent like I talked about in this Newsletter here.
The US will be FORCED to find a new buyer for US debt and they’ve chosen the globe via these Stablecoin Acts but it’ll take many years for the demand to outpace what Japan will be forced to sell over the coming decade. This pressure on the US dollar will reduce global liquidity until some equilibrium can be found and something else will need to take over where the Japanese yen was providing cheap borrowing power.
That’s all for the Free Preview now let’s get into the historical data around this trade below.
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