Bitcoin faced a short-term uncertainty amid ongoing carry trade unwind which could trigger a sell-off similar to early August.
What’s next for BTC as experts warn of a carry trade unwind event. Will it be similar to early August sell-off event?risk could compound amid ongoing Japanese-linked carry trade unwind. The largest crypto asset saw a relief rally to $58K earlier in the week. However, it erased some gains after the Trump-Harris US presidential debate.
Besides the US elections, the ongoing carry trade unwind, which triggered the early August dump to $49K, could affect BTC. The sell-off was linked to strengthening the Japanese Yen against the US dollar.“$USDJPY breaking down, it’s about to be goblin town all over again in markets as it approaches 140. Let’s see if $BTC can hold up.”For context, investors enter carry trade by borrowing from low or near-zero interest-rate currencies for higher-return assets.
But this changed when the BoJ hiked interest rates in August, triggering a carry trade unwind and a sell-off that also affected crypto markets. According to Yardeni Research, the carry trade could continue, especially amid next week’s expectations of a 50 bps Fed rate cut and liquidity “Expectations that the Fed will lower our interest rates, while the Bank of Japan raises their interest rates are boosting the yen and forcing traders to unwind their carry trades.”Meanwhile, US BTC ETF investors adopted a risk-on approach, matching the recent BTC relief recovery. The products experienced net daily inflows over the past two days, breaking a long streak of over $1.2 billion in outflows.
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