Amid Bitcoin's sharp decline, 'Yen Shock' concerns spread... Is the Yen carry trade being shaken?

Source: BlockMedia Original Title: Bitcoin Plummets Amid ‘Yen Shock’ Warnings Spread… Is the Yen Carry Trade Shaking? Original Link: https://www.blockmedia.co.kr/archives/1035863 In the New York digital asset market, Bitcoin continues to show a sharp correction trend, with the surge in the Japanese Yen triggering a “Yen shock” becoming a new variable in the market. During the short-term rapid decline phase, volatility in the foreign exchange market increases, and caution related to Yen arbitrage trading is spreading across the entire cryptocurrency market.

According to CoinMarketCap, Bitcoin initially fell to $86,000 in New York time, with a 24-hour decline of over 3%. As trading liquidity decreases approaching the weekend, the adjustment has rapidly expanded, and the recent short-term gains have been significantly reversed.

The Yen appreciates by 1.6% in one day… Yen arbitrage trading risks emerge

The foreign exchange market is under scrutiny due to the potential intervention by the Japanese government, causing the Yen to surge sharply. According to Bloomberg, the Yen rose to 155.90 JPY per USD, with a maximum single-day increase of 1.6%, marking the largest Yen appreciation since August last year. This level aligns with Japan’s actual intervention in the foreign exchange market last year.

Japanese Prime Minister Tomomi Inada recently stated that necessary measures are ready to address speculative and abnormal movements related to Yen depreciation. Subsequently, news emerged that the New York Federal Reserve conducted “interest rate checks” related to Yen exchange rates with major financial institutions, heightening market alertness to the possibility of Japan alone or Japan-U.S. joint intervention.

Yen appreciation puts pressure on leveraged trading that utilizes Yen arbitrage in the global financial markets. Positions borrowed in low-interest-rate currencies like Yen to invest in risk assets, once adjusted, could trigger synchronized volatility across all assets, which is a key focus of market attention.