Market News

By Francisco Rodrigues (All times ET unless indicated otherwise)

Bitcoin is struggling to hold ground as concerns over the strength of the yen and fiscal instability drove a divergence between crypto and traditional safe-haven assets.

Bitcoin fell 0.8% in 24 hours to sit below $88,000, and ether lost more than 1.6% to just under $2,900. The broader CoinDesk 20 (CD20) index retreated 1.54%.

The yen, meantime, rallied more than 1.4% against the dollar after Prime Minister Sanae Takaichi said Japan would “take all necessary measures to address speculative and highly abnormal movement.”

While Takaichi didn’t identify the market movements of concern, yields on the country’s 10-year bonds have this month reached a 27-year high before seeing a slight drop.

Traders are also interpreting a recent “rate check” by the Federal Reserve Bank of New York as a possible sign of coordinated action with Japan, a scenario that’s pushing investors off of riskier assets as the yen carry trade unwinds.

Michael Burry, the investor who profited off of the subprime mortgage crisis by shorting the market, that is, betting on a decline, recently pointed to Japanese bond yields closing the gap with global rates, commenting “repatriation pending.”

The suggestion is that nearly $5 trillion of overseas investments, mostly in the U.S., would be pulled back to take advantage of these yields. Capital has, as a result, fled risk assets in expectation of such a move. The Nikkei 225 index dropped 1.8%, while Nasdaq and S&P 500 futures fell.

That capital hasn’t rotated to bitcoin, however, but rather to gold. The precious metal topped $5,000 per ounce for the first time earlier today, and is already at $5,090. Bitcoin’s always-on nature, deep liquidity and instant settlement may be holding it back, according to NYDIG’s global head of research, Greg Cipolaro.

“Under periods of stress and uncertainty, liquidity preference dominates, and this dynamic hurts bitcoin far more than gold,” he wrote in a note shared with CoinDesk.

Blockchain data also suggests internal weakness. CryptoQuant said in a report that older bitcoin holders are starting to sell at a loss for the first time since October 2023.

Traders will be watching this week’s Federal Reserve meeting, where interest rates are expected to stay put, though Chair Jerome Powell’s guidance will be key.

Furthermore U.S. government shutdown risks, currently pegged at 79% on Polymarket and near 78% on Kalshi, add another layer of uncertainty ahead of a week that’ll see major tech firms report earnings and share guidance. Stay alert!