Japan’s 20-year government bond yield has surged to its highest level since 2008, triggering concerns that risk assets like bitcoin could face renewed selling pressure.
The yield rose to 2.265% last week amid growing speculation that the Bank of Japan (BOJ) may raise interest rates to combat inflation and manage its large public debt burden.
The sharp rise in yields has drawn parallels to market conditions in August 2024, when a stronger yen led to a broad sell-off in equities and cryptocurrencies.
During that period, investors sought safety in traditional assets, leading to bitcoin’s price correction.
A similar pattern may emerge now, particularly if the yen strengthens further against the US dollar.
Higher yields generally signal tighter financial conditions, discouraging carry trades, where investors borrow in yen to invest in higher-yielding assets such as bitcoin.
If the yen continues to appreciate, traders could unwind such positions, potentially putting downward pressure on bitcoin prices.
Institutional investors pare down crypto holdings
Amid rising bond yields and broader macroeconomic uncertainty, institutional investors have begun reducing their exposure to bitcoin.
The uncertainty surrounding US trade policies, along with the Federal Reserve’s cautious approach to interest rate cuts in 2025, has further dampened sentiment in risk markets.
“We believe that the geopolitical and economic uncertainty is causing institutions to pare down their crypto holdings, and Bitcoin could very well drop to the $70-80k range in the coming weeks,” Jeff Mei, chief operating officer at BTSE, told CoinDesk.
Bitcoin has been trading near its recent highs but now faces headwinds due to renewed fears of tighter financial conditions worldwide.
While some investors remain optimistic about long-term price appreciation, short-term volatility and a lack of clear bullish catalysts could lead to further price corrections.
“Only when this tariff war ends and the Fed resumes cutting rates will top cryptocurrencies resume trending towards previous all-time highs,” Mei added, reflecting growing apprehension about the impact of US trade policies and the Federal Reserve’s cautious stance on interest rate cuts in 2025.
Technical indicators point to further downside
Beyond macroeconomic factors, technical signals suggest that bitcoin may be at risk of a deeper pullback.
Augustine Fan, Head of Insights at SignalPlus, noted that bitcoin is currently testing its 200-day simple moving average (SMA), a critical technical support level.
Source: CoinMarketCap
“Price action has turned technically very negative, and the high realized volatility has worsened the BTC risk-adjusted profile, with few (if any) immediate positive catalysts on the horizon,” Fan said.
A sustained break below the 200-day SMA could indicate a shift in market sentiment, potentially accelerating further downside pressure.
Traders will be closely monitoring bitcoin’s price action and macroeconomic developments to gauge the next move in the cryptocurrency market.
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