Bitcoin and global markets shifted into a defensive mode following a strong Japanese bond market shock and renewed geopolitical tensions, which pushed BTC down more than 6% over the past week, coinciding with US stocks falling more than 2% to their lowest levels and global debt markets being exposed to a broad wave of selling.
According to a recent market analysis by QCP Asia, the decline is driven by rising Japanese government bond yields and escalating trade disputes between the United States and Europe, developments that analysts say are tightening financial conditions and eroding risk appetite across asset classes.
In light of these developments, Bitcoin has struggled to regain momentum as it trades below $90,000 after recently regaining the $97,000 level, increasingly looking like an interest rate-sensitive risky asset rather than a hedging tool.
Japanese bond market faces historic pressures
At the heart of this turmoil is a historic shift in Japan’s interest rate environment after decades of near-zero yields.
Yields on 10-year Japanese government bonds rose to around 2.29%, their highest level since 1999, unsettling investors accustomed to Japan’s role as a pillar of global financial stability.
The move exposed deep financial vulnerabilities, with public debt exceeding nearly 240% of GDP and total liabilities approaching 1.342 trillion yen.
Debt servicing is expected to absorb about a quarter of Japan’s fiscal spending by 2026, raising scrutiny over the country’s long-term viability as borrowing costs rise.
A QCP Asia analyst said: “As yields rise, Japan’s fiscal sustainability is publicly called into question, and the knock-on effects for global bonds underscore Japan’s position as a major catalyst for volatility. »
Rising JGB yields, pressure on the yen and political concerns
After decades of low inflation, Japan now faces persistent price pressures that have made long-term fixed-rate bonds less attractive.
As investors sold at discounts, yields rose further, fueling higher borrowing costs for mortgages, business loans and asset valuations across markets.
Institutional flows reveal this pressure: Japanese insurers sold $5.2 billion worth of bonds with maturities of more than ten years in December alone.
This is the fifth consecutive monthly sale and the largest sale since data collection began in 2004, bringing total net sales during that period to $8.7 billion.
Demand indicators also fell, with the coverage ratio in Japan’s latest 20-year bond issue coming in at 3.19, down from 4.1 previously and below the 12-month average.
At the same time, hedge funds stepped up their bets on the yen falling, increasing their net short positions by 35,624 contracts in the week ending January 13, the biggest weekly increase since May 2015.
As rates rise, Bitcoin trades as a high-beta, highly risk-sensitive asset.
Beyond Japan, geopolitical tensions have re-emerged in the form of new headwinds, as trade relations between the United States and Europe enter a more confrontational phase.
President Trump imposed 10% tariffs on eight European countries that oppose U.S. control of Greenland. These duties are expected to come into effect on February 1 and reach 25% by June.
Europe reacted quickly, jeopardizing a transatlantic trade relationship worth between $650 billion and $700 billion in bilateral goods.
The European Parliament is now considering suspending approval of the US-EU trade deal reached in July, a move that would represent a major escalation.
“With retaliatory measures looming on both sides, the question for markets is no longer whether tensions will escalate, but to what extent,” said the QCP analyst. wondering if this is a “new round of TACO measures” or a policy path that markets cannot ignore.
US Treasury Secretary Scott Besent added that recent market declines were a result of… “A six standard deviation move” in the Japanese bond market, describing it as “it’s all due to the runaway Japanese bond yields.”
As liquidity becomes tighter and volatility increases, crypto analyst Mitch said the price of Bitcoin could continue to fall until things become clearer from Japan, warning that $86,000 is a key support level that must be held to avoid a deeper decline towards $80,000.
Analyst Says Rising Japanese Government Bond Yields, Escalating Customs Tensions Are Pushing Bitcoin Into Defensive Mode appeared first on Cryptonews Arabic.