Bitcoin Plummets Below $87k Amid Japanese Bond Yield Surge
By: Isha Das
In a significant development shaking the cryptocurrency markets, Bitcoin's price has dropped below the $87,000 mark, erasing recent gains amounting to nearly 5% in early Asian trading on December 1. This decline in price is attributed to an unexpected surge in Japanese government bond yields, which triggered a broad risk-off sentiment among investors and disrupted a fragile, low-volume market structure. The unsettling incident resulted in Bitcoin falling from a consolidation range near $91,000, effectively wiping out approximately $150 billion from the total crypto market capitalization.
The catalyst for this market downturn appears to be the revision in Japan’s carry-trade, a critical global financial activity. The alterations set off a substantial selloff exacerbated by a market struggling with low liquidity levels, as highlighted by research from major industry players. The crypto market, which recently registered one of its lowest-volume weeks since July, faced a thinning order book incapable of withstanding strong selling pressures. According to industry experts, this led to what can be seen as a structural failure at a crucial resistance level.
Adding fuel to the fire, data suggests that the cryptocurrency's market structure was already under strain, with Bitcoin and Ethereum volumes plummeting significantly. Bitcoin's weekly volumes fell to $59.9 billion, a decline of 31%, while Ethereum saw a sharper fall of 43%. Experts describe this scenario as a liquidity event driven by both market positioning and macroeconomic repricing, further aggravated by Bitcoin facing its worst-performing month as it lost nearly 18% of its value in November.
The root of this turmoil extends to sudden macroeconomic changes in Tokyo, where the Japanese 10-year government bond yield climbed to 1.84%, a level not seen since 2008. This surge in yield rates, which also saw Japan’s two-year bonds reaching 1% for the first time since the 2008 Global Financial Crisis, has significant implications for the yen carry trade. This trade involves borrowing yen at low-interest rates to invest in higher-yielding risk assets, a practice now threatened by the potential for increased borrowing costs and a stronger yen impacting global capital flows, as noted by financial analyst Arthur Hayes.
Further complicating matters, the current crypto market's position appears precarious with reports indicating a disparity in trader behavior between Bitcoin and Ethereum. While Bitcoin traders seem to be de-risking, Ethereum traders continue to leverage heavily, creating a mismatched risk profile. Despite this turbulence, there remains considerable capital waiting to be injected into the market, with stablecoin balances on exchanges rising, ready to be deployed once the market settles.
