Now, please stop bottom-fishing.
Let's talk about a terrifying thing - the 'invisible base' of the global financial system is collapsing.
In the past thirty years, the prosperity of global asset prices (U.S. Treasuries, tech stocks, Bitcoin) has been driven by a common engine: Japan's zero-interest funds.
This is the underlying logic of Carry Trade.
Financial institutions borrow yen at near-zero cost and then buy high-yield assets globally. Trillions of dollars in 'free funds' have thus supported U.S. Treasuries, tech stocks, and also the long bull market of cryptocurrencies.
But this month, this logic that has lasted for thirty years has completely changed.
Japanese long-term bond yields are hitting decades-high levels:
- The 20-year government bond yield approaches 2.8%
- The 40-year government bond yield approaches 3.7%
This is not a mild interest rate hike, but a spring that has been suppressed for many years, suddenly bouncing back violently.
What does this mean?
1. Financing costs soar; borrowing yen is no longer free, but has even become expensive.
2. Exchange rate risk surges: Once the yen fluctuates significantly, margin pressure will force institutions to passively close positions at any cost.
3. Trillions of funds flowing against the tide: The unwind of Carry Trade is not a theoretical risk, but a reality that is happening.
With the wind at its back, Japan's monetary easing nourishes the world; against the wind, global liquidity is drawn away by Japan.
In the face of the macro tidal waves at this level, looking at the fluctuations in the cryptocurrency market over the past few days, you will feel that the crypto market is really too small. This is no longer a bull-bear struggle, but the tide of global liquidity is receding.
The world assumes that Japan will never move, but now it has really moved. And when it moves, the global market trembles.
Conclusion:
Before the situation becomes clear, protecting the principal is the top priority. Stop bottom-fishing, hold onto cash, and wait for the storm to pass.
