[Bitop Review] BOJ Rate Hike Hints Spark Yen Carry Trade Unwind Speculation; Bitcoin Plunges to $83K

US stocks experienced a challenging start to December, with the crypto market taking the lead in a significant downturn. This decline was influenced by speculation surrounding potential interest rate hikes by the Bank of Japan (BOJ), which fueled concerns about an unwinding of Yen carry trades. Bitcoin's price saw a notable drop, falling from the $90,000 mark during yesterday's Asian session to a low just above $83,000 in the evening. This market movement resulted in approximately $550 million in positions being liquidated over a 24-hour period.

US Manufacturing PMI Declines, Fed Rate Cut Probability Increases

Data released on Monday indicated a significant drop in the US ISM Manufacturing PMI for November, falling to 48.2. This represents the largest decline observed in four months, primarily attributed to weak new orders. In addition to the inflation data scheduled for release on Friday, other key economic reports this week include the November ADP private sector employment report and the preliminary December Consumer Confidence Index. These figures will provide further insight into the health of the US economy.

Ulrike Hoffmann-Burchardi, an analyst at UBS Global Wealth Management, commented on the historical performance of the stock market. She noted that the market tends to perform best when the economy is not in a recession and the Federal Reserve is actively cutting interest rates. Recent economic indicators suggest a high probability that the Fed will implement a 25 basis point rate cut in the upcoming period. Furthermore, Hoffmann-Burchardi suggested that the current economic weakness in the US might be a temporary phase, with expectations for global economic growth to accelerate in 2026.

BOJ Rate Hike Speculation Triggers Yen Carry Trade Unwind and Bitcoin Sell-off

Bitcoin has experienced a consistent decline from its peak of $90,000, commencing yesterday during the Asian session and reaching a low point above $83,000 overnight. The cryptocurrency market's downturn was largely driven by speculation surrounding a potential interest rate hike by the Bank of Japan. This prospect ignited concerns about the unwinding of the yen carry trade, a strategy where investors borrow in low-interest-rate currencies like the yen to invest in higher-yielding assets. The market reaction led to substantial liquidations, with approximately $550 million in positions being closed across the network within a 24-hour timeframe.

Strategy Establishes $1.4 Billion Reserve to Address Bitcoin Sale Concerns

Strategy, a company recognized for its Bitcoin reserve strategy, has announced the formation of a $1.44 billion reserve fund. This fund is intended to cover future dividend and interest payments, a move designed to alleviate existing concerns among stakeholders. Previously, CEO Phong Le had acknowledged that if the company's net asset value (mNAV) were to remain below 1 for an extended period and financing options became unavailable, selling a portion of its Bitcoin holdings would be considered a last resort to maintain the company's financial stability.

In related news, U.S. spot Bitcoin Exchange-Traded Funds (ETFs) recorded inflows of only $70 million last week. This follows a period of significant outflows, totaling approximately $4.6 billion over the past month. The majority of this outflow pressure, amounting to about $2.3 billion, originated from BlackRock's IBIT. The ETF has experienced investor withdrawals for five consecutive weeks, marking the longest such streak since its launch in January 2024. Despite these outflows, company executives have stated that such fluctuations are normal given the high liquidity of ETFs. They also emphasized that demand for Bitcoin ETFs has been robust throughout the year, with IBIT's assets under management nearing $100 billion at the peak of market demand.