CNBC host Jim Cramer linked the latest risk move in BTC (BTC) and crypto stocks to growing stress in Japan’s funding markets – and to Strategy’s increasingly tight link to Bitcoin.
“This knee-jerk, somewhat vicious, decline smacks of anticipation of hedge funds exploding on Japan’s port-trade, endless worry about ‘harmful’ hypercaler spending and Strategy/Bitcoin since at this level they are almost the same thing,” Cramer wrote in a Dec. 1 post.
In practical terms, he is pointing to three connected pressures for traditional investors:
Analysts say the overnight decline in BTC during Asian hours followed a familiar macro pattern.
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Two-year Japanese government bond (JGB) yields are trading near 1% and 10-year yields around 1.9%, their highest levels since 2008, while derivatives markets are pricing in strong odds of another Bank of Japan rate hike in December.
Higher JGB yields make borrowing in yen more expensive and volatile. Global macro funds that borrow yen or use yen swaps to fund higher-yielding US and European assets are being forced to reduce so-called “carry trades”, often de-risking by selling the most volatile positions first, including Bitcoin.
The “Yen carry trade” is a strategy where global investors borrow Japanese yen at very low interest rates and use that cheap capital to buy higher-yielding assets abroad, such as stocks, US bonds or even Bitcoin.
As long as Japanese rates remain close to zero and the yen remains weak, the trade is profitable. But when Japan’s government bond yields rise, as they have in recent weeks, the cost of borrowing the yen rises and the currency strengthens.
That forces leveraged funds to unwind trading by selling risky assets, converting back into yen and repaying their loans, a process that could accelerate a sharp selloff in crypto and tech markets.
In his post, Cramer also pointed to renewed stress in “hyper-spender” growth equities — big tech and AI names that have relied heavily on aggressive investing and persistent cash burn to capture market share.
