## The Wave of Yen Carry Trade Liquidation Creates an Awkward Moment, Bitcoin Takes the Lead

Bitcoin's recent price has come under pressure; on the surface, it appears to be just normal fluctuations, but the underlying drivers are far more complex—massive unwinding of yen carry trades is reshaping the global liquidity landscape.

**Invisible Leverage: Wall Street's "Money Printing Machine"**

Wall Street discovered this trick over 20 years ago: borrow in Japan at nearly 0% interest rates, then move to the US market to buy bonds with yields of 4-5%, earning the interest rate differential. This seemingly simple operation has become an invisible engine of global liquidity—trillions of dollars flow through currency arbitrage.

The mechanism is actually straightforward: low-interest borrowing → high-yield investments → locking in the interest spread. But when conditions change, everything begins to reverse.

**Critical Point Approaching: Diverging Policies of Two Major Central Banks**

Imbalance is forming. The Bank of Japan has started raising interest rates to support the yen, while the Federal Reserve is cutting rates for the third time this year. Borrowing costs rise, and exchange rates become unfavorable—arbitrageurs' "free lunch" is no longer free.

This not only affects micro-dynamics in financial markets but also triggers liquidity gaps. When financing costs shift from zero to positive and continue rising, leveraged positions face forced liquidation.

**Why Bitcoin Is at the Forefront**

Among risk assets, Bitcoin often serves as the most sensitive barometer. When yen carry trade unwinding triggers a chain reaction, highly leveraged crypto assets are the first to experience sell-offs. Investors are forced to liquidate US assets to repay yen-denominated debt, causing liquidity to withdraw from global markets, and Bitcoin is precisely a risk asset.

According to market data, Bitcoin's current trading price is about $91,260 (Beijing time), fluctuating between Fibonacci retracement levels 0.618 and 0.786. Historically, Bitcoin has experienced declines of over 50%, but mining costs provide a bottom reference—at this awkward moment, support levels still exist.

**Dual Pressures: Short-term Shock vs. Long-term Buffer**

In the short term, forced selling caused by yen carry trade unwinding may lead to sharp volatility. But at the same time, the Fed is initiating a new easing cycle—stopping quantitative tightening (QT), purchasing $40 billion in government bonds over the next 30 days. The money printer is restarting, and policy easing is gradually being released.

These two forces are moving in opposite directions: one is liquidity withdrawal from the market, the other is central bank funds gradually injected. The former is rapid, the latter slow; the former causes pain, the latter restores.

**This Awkward Moment Requires Patience**

Volatility is normal in crypto markets, not an anomaly. The market is correcting under the tug of these two forces, but the long-term logic remains unchanged—an easing cycle will ultimately support risk assets. For Bitcoin holders, the test is not just coping with the current sell-off but waiting for liquidity to recover and the rebound opportunity.