The cryptocurrency market plunged sharply today, with total market capitalization falling below $3 trillion. Bitcoin slid to $86,904, Ethereum dropped to $2,817, and XRP touched $1.99. Other major coins like BNB, Solana, and Cardano also recorded losses, showing broad-based weakness across digital assets.
Japan’s Bond Yields Trigger Shockwaves
Experts point to Japan’s surging long-duration yields as the main factor behind today’s market turmoil. Driven by massive stimulus measures announced by the new Japanese Prime Minister, yields on long-term Japanese bonds spiked dramatically, sending ripple effects throughout global financial markets.
The Chain Reaction Explained
Japan’s long yields act as a benchmark for global fixed income. When they surge, bond markets worldwide are forced to reprice, putting upward pressure on U.S. long yields—even amid Federal Reserve rate cuts. This sudden repricing has cascading effects: higher mortgage rates, tighter credit conditions, and funding stress across banks.
Collateral and Liquidity Crunch Hits Crypto
Rising yields reduce the value of Treasuries and mortgage-backed securities, leading to higher haircuts in repo markets and a contraction in system-wide liquidity. With bank reserves already low, collateral erosion forces deleveraging, hitting highly leveraged assets like cryptocurrencies and stocks first.
Global Repatriation Adds Fuel to the Fire
Japanese institutional investors, including insurers and pension funds, are expected to repatriate funds to take advantage of higher domestic yields. This move drains global liquidity further, putting additional upward pressure on U.S. yields and reinforcing the market stress.
Analysts warn that the effects on crypto, equities, and global funding could continue in the coming days as markets adjust to this latest repricing.
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