The yen hit 163.23 per dollar, its weakest level since late 1986, prompting traders to brace for a hawkish response from the Bank of Japan. The currency has been borrowed at near-zero rates as part of the yen carry trade, a strategy that funds risk assets like Bitcoin, and Japanese monetary tightening would force traders to unwind these positions in unison. The BoJ policy rate now stands near 1%, a 31-year high, with markets pricing in an additional 25 to 27 basis points of tightening by year-end. Previous tightening cycles have caused Bitcoin drawdowns of 20% to 30%, and a surprise hawkish shift or direct currency intervention could trigger rapid deleveraging of leveraged crypto positions.
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