Yesterday I woke up, opened my phone, and saw the crypto market bleeding again. Not the usual 2-3% wobble we shrug off with coffee—this was a proper 5% haircut across the board before most of Europe even had breakfast. Bitcoin sitting at $87k felt almost nostalgic, like seeing an ex you thought was long gone. And the question everyone in my group chats kept asking was the same: why now?
The answer, once you dig past the usual “profit taking” noise, is actually pretty simple. Japan just turned off the cheap-money tap that has been quietly irrigating crypto for years.
The Day the Yen Carry Trade Started Coughing Blood
Let me take you back a second. For literally a decade, borrowing yen has been cheaper than free. Negative interest rates, endless QE, you name it. Smart (and not-so-smart) money borrowed trillions in yen, swapped it into dollars, and went shopping for anything that promised yield: U.S. Treasuries, tech stocks, and—crucially—Bitcoin and altcoins.
That river of liquidity didn’t just help crypto; it was half the bull market. Every time Bitcoin looked wobbly, another wave of carry-trade money showed up like a rich uncle at Christmas. And nobody complained.
Then Japan’s 10-year bond yield punched through 1.87% this week—highest since 2008—and the 2-year hit 1%. That doesn’t sound dramatic until you realize those numbers were near zero for most of the last fifteen years. Suddenly borrowing yen isn’t free anymore. It actually costs something. And when the cost flips from profit to pain, positions get unwound. Fast.
What We Actually Saw on Chain and on Exchanges
The numbers are brutal:
- $536 million liquidated in 24 hours—mostly longs
- Total market cap down 5.3% to barely above $3 trillion
- Bitcoin open interest dropped 0.66% to $124 billion
- Crypto Fear & Greed Index fell to 23—back in “Extreme Fear” territory
- Average 14-day RSI across the top 50 coins sitting at 36 (oversold but not capitulation yet)
In plain English: a lot of leveraged bulls just got carried out on stretchers.
Bitcoin: From $126k Dream to $87k Reality Check
Remember mid-October when everyone was calling for $150k by Christmas? Yeah, about that. Bitcoin is now roughly 30% off its local high and November closed as its worst month since the 2022 bear market lows. That’s not just a healthy correction anymore; that’s a proper trend change until proven otherwise.
I’ve been through enough cycles to know that when the macro backdrop turns hostile, technicals stop mattering for a while. And right now the macro is screaming caution.
Ethereum, XRP, BNB—Nobody Escapes
Ether is clinging to $2,800 but feels heavy. The ETH/BTC pair keeps making new lows for the year, which tells you money is rotating out, not just sitting on the sidelines.
XRP gave back almost all the post-election pump and is flirting with $2 again. BNB, usually the steady one, dropped under $830. Even Solana—everyone’s darling—can’t hold $130 with conviction.
Memecoins are mixed bag as usual: SHIB and BONK actually green on the day (classic flight-to-trash move), while PEPE is down 3% because someone apparently woke up and remembered it’s still just a frog picture.
“When the carry trade reverses, risk assets don’t get to choose whether they participate or not. They all go down together.”
— Veteran macro trader on X this morning
Why This Feels Different From the Usual Dip
Most crypto corrections are internal: too much leverage on perpetuals, some exchange drama, a random tweet from Elon. This one is external and structural.
When Japanese housewives (yes, the famous Mrs. Watanabe) start selling foreign assets to buy JGBs yielding almost 2%, that’s a regime change. And regime changes don’t reverse in a week.
Add to that:
- S&P just downgraded Tether’s stability rating to the lowest tier (never a good look)
- USDT trading below peg in offshore CNY markets again
- Nasdaq rolling over on AI debt concerns
- China reminding everyone they still hate crypto
It’s the full risk-off cocktail.
What Happens Next? Three Scenarios
Scenario 1 – Slow Bleed (most likely for now)
The BOJ stays vague in mid-December, yields keep creeping higher, yen strengthens gradually. Crypto grinds lower into year-end tax harvesting. We probably test $80k–$82k on Bitcoin before any serious bounce.
Scenario 2 – BOJ Shocks with Actual Hike
If Governor Ueda comes out swinging and signals a January move, we get a proper flush. $75k Bitcoin becomes realistic, maybe even lower if leveraged longs keep piling in on the way down (they always do).
Scenario 3 – Fed Saves Christmas
Powell goes full dovish, markets price multiple 50bp cuts, dollar tanks, carry trade gets a reprieve. Risk assets rip into year-end. Honestly? I give this one under 20% probability right now.
Should You Buy This Dip?
Look, I’m not your financial advisor, but I’ve been buying small chunks on the way down because I still believe in the long-term story. That said, anyone telling you “it’s definitely bottomed” is selling something.
The honest truth? We might not be done. When carry trades unwind, they tend to overshoot. Some of the smartest macro accounts I follow are short risk assets with both hands right now.
My personal plan: keep some dry powder, average in slowly, and watch Japanese bond yields like a hawk. If the 10-year pushes above 2%, things could get ugly fast.
Because at the end of the day, crypto doesn’t exist in a vacuum. When the biggest carry trade in history starts coughing blood, even Bitcoin has to take its medicine.
Stay safe out there.
