Bitcoin Under Pressure as Yen Rally and Rising Bond Yields Intensify
Bitcoin is facing increased pressure from a perfect storm of macroeconomic pressures, including a rally in the yen and rising bond yields. The Japanese government's 10-year bond yield has surged to 3% for the first time since 1996, while the 30-year JGB yield has reached record levels near 4.18-4.205%. This has led to a significant rally in the yen against the dollar, with the USD/JPY exchange rate dropping from above 160 to around 153.9-154.3.
The Bank of Japan's policy rate now sits at 1%, its highest since 1995, following a rate hike in June this year. Markets are pricing in further tightening ahead of the BOJ's next meeting on September 17-18. Coordinated currency intervention efforts between the US and Japan have reportedly involved around $96 billion.
The total size of yen-funded carry trades could be as large as $500 billion. When the yen strengthens, borrowers who took out yen loans owe more in dollar terms, while rising Japanese yields increase borrowing costs, squeezing both sides of the trade. Historically, Bitcoin has experienced price drawdowns of up to 20% during past episodes of sharp yen appreciation.