Speculative yen shorts reach a nine-year high ahead of the Bank of Japan’s expected rate increase, raising volatility risks for risk assets like bitcoin.
Bitcoin traders are monitoring Tuesday’s Bank of Japan meeting, where policymakers are expected to raise the benchmark interest rate to 1 percent from 0.75 percent. The move would mark the highest rate since 1995 and could disrupt yen-funded carry trades supporting risk assets.
Leveraged funds have amassed over 115,000 speculative short yen contracts, the most since November 2017, according to Commodity Futures Trading Commission data. A hawkish signal from Governor Kazuo Ueda could spark a sharp short squeeze, strengthening the yen and unwinding carry trades.
A rapid unwind may trigger broader market volatility, with bitcoin likely among the most affected assets due to its sensitivity to liquidity shifts.