Don't rush to sell; the worst days may be over.

Author: Alertforalpha & Translation: Plain Language Blockchain

Are Yen Carry Trades Being Unwound Again? Is This the Reason for the Cryptocurrency Crash?

If you've been following social media today, you've probably seen the panic. Everyone's saying it's another August 2024 repeat.

But the reality is: things might not be as you think.

Why It Might Not Be Yen Carry Trades

The narrative is simple: investors bought cheap yen to buy high-yield borrowing assets (such as US tech stocks or cryptocurrencies).

Now, with Japanese bonds surging, they're forced to sell those assets back to yen.

Sounds terrifying, right?

But this theory has two major flaws. 1. The yen didn't spike. If everyone were rushing to buy back yen to pay off loans, the yen's value against the dollar should have skyrocketed. But it didn't. It's essentially flat compared to last week. 2. Leverage has disappeared. A macro analyst—someone who has spent his entire career trading yen—pointed out a few months ago that most of the reckless leverage had been wiped out in the August crash. Traders suffered heavy losses and didn't re-enter the same trades with the same intensity. So, if it's not a massive global liquidation, is it the documents? The real culprit: the algorithm and the calendar. The most boring explanation is usually correct. We just flipped to the December calendar. This is the golden time to do the following: Institutional rebalancing; Tax-loss harting; Automated risk resets; The "Algo Flush". As the new month approaches midnight (UTC time), adjustments are likely to trigger sell orders to reset hedging and adjust risk stocks. This is not emotional; it's mechanical. Institutions are selling underperforming assets (like Bitcoin they bought at a high price) to consider gains in other directions before the end of the year. This explains why the sell-off was coordinated and mechanized—because that's just how it is. What to watch next: Bitcoin encountered resistance at the daily Bollinger Band moving average, leading to this fluctuation. But as long as we hold the $80,000-$82,000 level, the structure remains intact. This week is packed with macroeconomic data: Monday: Jerome Powell's speech; Wednesday: ADP unemployment figures and ISM Services PMI; Friday: PCE inflation and employment data. Volatility is expected. But don't let the image of a "yen panic" scare you into selling your positions. The worst of the leverage cleanup may be over.