Bitcoin Surpasses $63,000 as Yen Carry Trade Liquidation Risks Increase

The risk of liquidation in the yen carry trade is emerging as a macro variable for risk assets such as Bitcoin (BTC). The Bank of Japan announced on July 31 that it would maintain the uncollateralized overnight call rate at 1.0%. On August 3, the Japanese Ministry of Finance conducted yen-buying interventions in cooperation with the U.S. Treasury, mentioning the possibility of further interventions. The yen carry trade is a strategy where funds are borrowed in a low-interest currency to invest in higher-yielding assets, and if the yen surges, position liquidations may occur. According to Investing.com, the dollar remained at multi-month lows, trading at 159.25 yen. Bitcoin showed stability above $63,000. CoinDesk reported that the recent 52-week correlation between Bitcoin and the dollar-yen pair has dropped to -0.90, suggesting that a stronger dollar could pose greater risks to Bitcoin. Some investors are considering using the Swiss franc instead of the yen as the funding currency for carry trades, thanks to its lower volatility and interest rates. The market is focusing on which positions will be unwound first in the event of a stronger yen, rather than concluding that the yen carry trade has ended.

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