Yen's Rapid Surge Triggers Margin Cuts, Impacting Bitcoin Value

The yen's rapid surge has triggered margin cuts across risk books, leading to a decline in Bitcoin's value. The currency's impact on global markets is significant due to its large scale, with a channel valued at over $250 billion influencing global risk conditions.

A carry trade involves borrowing in a low-rate currency and investing in assets with a higher expected return, collecting the rate differential as long as the funding leg stays stable. The yen's strength can lead to a 'don't get caught' market where traders cut carry exposure earlier and faster.

The BIS data shows that yen-denominated loans to non-banks resident outside Japan rose to about ¥40 trillion by March 2024, roughly $250 billion using BIS' conversion at the time. This channel can influence global risk conditions, and crypto trades inside those conditions.