The Bank of Japan (BOJ) is widely expected to raise its benchmark interest rate on June 16, a move analysts warn could unwind the yen carry trade and trigger sharp Bitcoin volatility reminiscent of the 2024 crash. The analysis, reported by CoinDesk, highlights record speculative short positions on the yen, creating a setup similar to the July 31, 2024 rate hike that sent Bitcoin tumbling 23% in a week.
The yen carry trade involves borrowing yen at ultra-low rates and investing in higher-yielding assets globally, including cryptocurrencies like Bitcoin. When the BOJ tightens policy, the yen strengthens, forcing investors to liquidate risk assets to repay yen loans. As of June 9, U.S. Commodity Futures Trading Commission data showed leveraged funds held over 115,000 short yen contracts — the highest since November 2017. A rate increase to the 0.75%–1% range, the highest since 1995, could trigger a short squeeze and a broad carry trade unwind.
In July 2024, a similar surge in yen shorts preceded the BOJ's hike, driving Bitcoin from around $65,000 to $50,000. The current environment adds headwinds like U.S. regulatory uncertainty and slowing global growth, potentially deepening any sell-off. Traders are bracing for the June 16 decision, aware that a hawkish move could pressure not only Bitcoin but also Ethereum and major altcoins, as crypto increasingly correlates with global liquidity conditions.
