🚨 BANK OF JAPAN RESPONSIBLE FOR CRYPTO CRASH??? 📉
🔥 On August 5, crypto experienced one of its worst days in years, shedding 15% of its value over one weekend. The Bank of Japan's abrupt rate hikes played a crucial role in this dramatic downturn. Let's dive into what happened and what's next.
🔥 The Yen's Role in the Crypto Crash
📊 The crash was triggered by surging costs on yen-denominated loans, causing a massive sell-off in leveraged positions. Traders, heavily dependent on cheap yen loans, were caught off guard when the Bank of Japan raised short-term bond rates from 0% to 0.25% on July 31.
💡 Bargain-Bin Borrowing Goes Bust
💸 Crypto doesn't trade on fundamentals but on short-term speculative moves, often fueled by massive leverage. Before the crash, open interest in crypto borrowing stood at nearly $40 billion. Much of this leverage was financed by ultra-low-interest loans from Japan.
💥 The Yen Carry Trade Unraveled
🌐 This "yen carry trade" saw traders borrowing cheaply in yen to invest in higher-yielding assets, including crypto. The Bank of Japan's rate hike caused the yen to surge in value, making these loans far more expensive and triggering a wave of margin calls and position liquidations.
📉 Crypto Market Carnage
💥 The result? A historic sell-off. Bitcoin and Ethereum plunged 18% and 26%, respectively, while the S&P 500 dropped over 5%. Jump Trading's $370 million ETH sell-off added fuel to the fire but wasn't the primary cause. Over $1 billion in leveraged positions were liquidated within 24 hours.
IF this was the primary cause for the price drop, crypto should recover well and quickly.
Stay tuned for more updates and follow @Professor Mende - Bonuz Ecosystem Founder !!
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