jakiro
Author: Tehsin AMLANI, MESSARI Research Analyst; Compilation: 0xjs@作 作 作 作 作 作
The market has been fully sold out of the world. In the past 48 hours, the US index has fallen by 3%, and the market value of cryptocurrencies has fallen 11%.
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One of the factor that caused the global market to atrophy is the impact of the Bank of Japan (BOJ) raising interest rates and its influence on a popular investment strategy arbitrage transaction.Arbitrage transactions refer to investors borrow a low interest rate currency (such as the yen), and then invest in the borrowed currency to a high interest rate currency (such as the US dollar).
Over the years, investors have borrowed the yen at low interest rates (such as about 0.4%) and used the borrowed yen as lever.They exchanged the yen into US dollars (or other powerful, high -yield currencies) and obtained almost free margin.This arbitrage is possible because there is a big gap between the low borrowing rate of the yen and the high interest rate of the US dollar.
However, since the Bank of Japan raised interest rates from 0-0.1%to ≈0.25%last Sunday, and effectively ended negative interest rate policies, the attractiveness of the yen arbitrage transactions has decreased significantly, which has led many investors to close their positions.
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As investors repay the yen borrowed, the yen has strengthened against the US dollar, and the US dollar/yen currency has just reached the lowest level since 2023.
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With the strengthening of the yen, more Japanese yen arbitrage transactions will be added to bonds, and basic assets will be sold, which will hit the global market.
The era of free yen loans is about to end.
What does this mean for the cryptocurrency market?The risk of cryptocurrencies is still higher than US stocks. Therefore, the decline in traditional markets usually lead to a bigger decline in the cryptocurrency market.
In view of the recent high -loss rate, stubborn inflation rate, geopolitical uncertainty, and the follow -up impact of the upcoming random arbitrage transaction, we may experience the upcoming turbulence.
