Why Markets Are Crashing: The Yen Carry Trade Explained

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7 Aug 2024

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Why Markets Are Crashing: The Yen Carry Trade Explained Sunday, around 8:00 p.m. EST, the crypto market started to “collapse”, triggering a broader financial shock. This isn’t just typical volatility—it’s driven by the unwinding of the “yen carry trade.“ What is the Yen Carry Trade? ️ Borrow Yen: Low interest rates (~0%) ️ Convert to USD: Higher yields in U.S. assets ️ Profit from the Spread: Interest rate arbitrage The Issue: Recent strengthening of the yen (up 5%) and falling U.S. yields have turned this moneymaker into a money loser. The fallout? Major liquidations across the board, affecting stocks, bonds, and private assets. Potential Contagion: ️Big hedge funds ️Private wealth management ️Sovereign wealth funds If liquidated, expect massive asset dumps. This could be a brief panic or a prolonged crisis like the Great Financial Crisis. Staying informed and ready to act on long-term opportunities is crucial. As we navigate this volatility, remember: research and strategic ... Source: Monero (XMR) Revolution

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