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There is a growing narrative among XRP enthusiasts that a major unwinding in the Japanese yen carry trade could trigger a global liquidity crisis. In this scenario, these enthusiasts have positioned XRP as the solution to stabilizing disrupted financial flows, starting in Japan and rippling worldwide.

Spike in Japan’s 20-year government bondAn XRP community member highlighted that Japan’s 20-year government bond yield hit 2.751%, increasing by 0.035%.  

Higher yields signal investor demand for safer, higher-return Japanese debt amid BoJ tightening. This pulls money back to Japan, accelerating the unwinding, that is, traders selling foreign assets to cover yen loans. Past unwinds caused global volatility, which analysts have warned could happen soon. 

The yen carry trade is a popular investment strategy that has fueled global markets for decades. Notably, Japan’s low interest rates make borrowing yen inexpensive.

Traders convert yen to higher-yielding currencies such as USD and invest in assets like U.S. stocks, bonds or emerging market debt. In the end, they pocket the interest rate differential as profit.

It provides cheap liquidity to risk assets, boosting everything from Wall Street to crypto. However, sudden yen strength erodes profits and triggers forced sales.

Analysts note that a liquidity crisis is looming as the carry trade is about to collapse. The trade is reversing due to shifting monetary policies, creating a vicious cycle.

To combat inflation and yen weakness, the BoJ has normalized rates since 2024. This makes borrowing yen more expensive, squeezing profits.

Also, the U.S. Federal Reserve easing cycle narrows the yield gap, making the trade less attractive.

Can XRP stop Japan’s liquidity crunch?An unwind is not just a Japanese problem but a global liquidity crunch. Trillions in yen-funded investments flood back, selling off U.S. and global assets. This could depress bond prices, spike U.S. yields and trigger stock sell-offs.

However, XRP enters as a proposed fix for the resulting chaos, leveraging Ripple's tech for instant, low-cost global transfers.

In a crisis, banks need quick access to fiat without prefunding accounts. XRP acts as on-demand liquidity, settling cross-border payments in seconds.

Moreover, Ripple has a strategic partnership with Japan’s SBI Holdings, integrating XRP into local payments. Therefore, if yen liquidity dries up, Japanese institutions could use XRP to source USD instantly, bypassing carry trade fallout.

Critics, however, argued that this is hype, noting that XRP’s role depends on adoption.

American model Bri Teresi recently discussed the idea that XRP could play a role in Japan’s reverse yen carry trade, a multitrillion-dollar unwind now moving through global markets. 

In a recent post on X, Teresi said she believes XRP matches the type of fast and programmable system that the financial infrastructure of today needs. 

Teresi Spotlights XRP’s Strengths She called attention to guidance from the Bank for International Settlements (BIS), which says an effective settlement asset should turn over 8 to 10 times a day so banks avoid holding slow-moving currency. 

I believe XRP will be used as a bridge asset in the reverse Yen carry trade. Right now, the BIS says an efficient settlement asset should turn over 8–10 times per day to prevent banks from sitting on huge piles of stagnant currencies. But in a new financial system that’s faster,…

— Bri Teresi (@briteresi) November 27, 2025

Teresi argued that newer systems focus on speed, and she sees XRP meeting that requirement, with SBI Remit in Japan already using it for faster cross-border settlements.

According to the model, XRP’s design allows it to move far faster than the BIS benchmark. After watching an analysis from crypto educator Lewis Jackson, she raised an important question: if trillions begin crossing borders as this reverse carry trade unwinds, what kind of transaction speed will regulators expect from a bridge asset like XRP?

What is The Reverse Carry Trade? For context, Jackson highlighted the entire situation in a recent podcast episode. During his commentary, he discussed how a carry trade works, using a simple example. 

Specifically, a person could borrow $100,000 in a country offering 0% interest, convert the funds into their own currency, and invest it at a 5% return. After one year, that investor would still owe exactly $100,000, but the investment would produce $105,000, leaving $5,000 in profit. 

Jackson explained that Japan enabled this type of strategy for more than twenty years because the Bank of Japan cut interest rates to 0% in 1999, held that level for years, and even pushed rates negative in 2016, which effectively paid people to borrow.

He noted that this environment created what the market calls the yen carry trade. Ministry of Finance data places the size of this trade between $4.2 trillion and $4.5 trillion, with major global banks and financial institutions taking part. The Bank for International Settlements documented this activity as well.

However, everything changed on March 19, 2024, when the Bank of Japan ended its negative-rate era and raised its benchmark rate to 0.1%. Jackson said the small move created major concern because investors feared more hikes could follow. 

Notably, higher rates would erase the profit potential of carry trades, so many traders started to unwind their positions. This led to the reverse carry trade. He estimated that roughly 40% of the trade had already reversed, leaving 60% still active. This remaining portion could strain the system if it unwinds too quickly.

XRP Could Have a Role to Play Jackson then explained why some people in the crypto community believe XRP could help. For context, reversing a carry trade at this scale requires fast and reliable currency conversion, and traditional rails often move slowly and cost a lot. 

According to him, XRP offers a quicker, cheaper, and more secure way to move value across borders. He then highlighted Japan’s long relationship with XRP. Specifically, SBI Remit uses XRP for payment routes between Japan and the Philippines and between Japan and Indonesia. Also, Japanese institutions maintain long-running partnerships with Ripple, which gives the theory more weight.

Jackson noted that he had studied BIS documents, Japanese regulatory material, and SBI Remit’s integrations, and confirmed that the major details behind the reverse carry trade storyline all come from established sources. 

He then called attention to discussions over how XRP’s price might react if these flows ran through the asset, with some predicting price surges to thousands. While Jackson does not support any specific prediction, he said Japan’s policy shift, the scale of the unwind, and XRP’s presence in the country create a setup that deserves serious attention.

DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.

Japan’s Bond Shock Slams Crypto: $640 Million Liquidated as 10-Year JGB Hits 17-Year High

Yen Carry Trade Collision: Bank of Japan’s Rate Shock Aims at Bitcoin | US Crypto News

Updated Dec 7, 2025, 1:50 p.m. Published Dec 7, 2025, 5:36 a.m.

3 min read

Summary

Impending BOJ rate hike largely priced in; Japanese bond yields near multi-decade highs.Speculators maintain net bullish positions in the yen, limiting scope for sudden yen strength.BOJ tightening may contribute to sustained upward pressure on global yields, impacting risk sentiment.With the Bank of Japan (BOJ) expected to hike rates next week, some observers are worried that the Japanese yen could surge, triggering an unwinding of "carry trades," crushing bitcoin.

Their analysis, however, overlooks actual positioning in the FX and bond markets, missing the nuance and far more likely risk that Japanese yields, by anchoring and potentially lifting global bond yields, could eventually weigh over risk assets rather than the yen itself.

Popular yen carry tradesBefore diving deeper, let's break down the yen carry trade and its influence on global markets over the past few decades.

The yen (JPY) carry trade involves investors borrowing yen at low rates in Japan and investing in high-yielding assets. For decades, Japan kept interest rates pinned near zero, prompting traders to borrow in yen and invest in U.S. tech stocks and U.S. Treasury notes.

As Charles Schwab noted, "Going long on tech and short on the yen were two very popular trades, because for many years, the yen had been the cheapest major funding currency and tech was consistently profitable."

With the BOJ expected to raise rates, concerns are rising that the yen will lose its cheap-funding status, making carry trades less attractive. Higher Japanese interest rates and JGB yields, along with a strengthening yen, could trigger carry trade unwinds – Japanese capital repatriating from overseas assets and sparking broad risk aversion, including in BTC, as witnessed in August 2025.

Debunking the scareThis analysis, however, lacks nuance on several levels.

First and foremost, Japanese rates – even after the expected hike – would sit at just 0.75%, versus 3.75% in the U.S. The yield differential would still remain wide enough to favor U.S. assets and discourage mass unwinding of carry trades. In other words, BOJ will remain the most dovish major central bank.

Secondly, the impending BOJ rate hike is hardly unexpected and is already priced in, as evidenced by Japanese government bond (JGB) yields hovering near multi-decade highs. The benchmark 10-year JGB yield currently stands at 1.95%, which is more than 100 basis points above the official Japanese benchmark interest rate of 0.75% projected after the hike. The same can said about the two-year Japanese yield, which is hovering above 1%.

This disconnect between bond yields and policy rates suggests market expectations for tighter monetary conditions are likely already priced in, reducing the shock value of the rate adjustment itself.

"Japan’s 1.7% JGB yield isn’t a surprise. It has been in forward markets for more than a year, and investors have already repositioned for BOJ normalization since 2023," InvestingLive's Chief Asia-Pacific Currency Analyst Eamonn Sheridan said in a recent explainer.

Bullish yen positioningLastly, speculators' net long yen positions leave little room for panic buying post-rate hike, and even less reason for carry trade unwinds.

Data tracked by Investing.com shows that speculators' net positioning has been consistently bullish on the yen since February this year.

This starkly contrasts with mid-2024, when speculators were bearish on the yen. That likely triggered panic buying of the yen when the BOJ raised rates from 0.25% to 0.5% on July 31, 2024, leading to the unwinding of carry trades and losses in stocks and cryptocurrencies.

Another notable difference back then was that the 10-year yield was on the verge of breaking above 1% for the first time in decades, which likely triggered a shock adjustment. That's no longer the case, as yields have been above 1% and rising for months, as discussed earlier.

The yen's role as a risk-on/risk-off barometer has come under question recently, with the Swiss franc emerging as a rival offering relatively lower rates and reduced volatility.

To conclude, the expected BOJ rate hike could bring volatility, but it is unlikely to be anything like what was seen in August 2025. Investors have already positioned for tightening, as Schwab noted, and adjustments to BOJ tightening are likely to happen gradually and are already partially underway.

What could go wrong?Other things being equal, the real risk lies in Japanese tightening sustaining elevated U.S. Treasury yields, countering the impact of expected Fed rate cuts.

This dynamic could dampen global risk appetite, as persistently high yields raise borrowing costs and weigh on asset valuations, including those of cryptocurrencies and equities.

Rather than a sudden yen surge unwinding carry trades, watch BOJ's broader global market impact.

Another macro risk: President Trump's push for global fiscal expansion, which could stoke debt fears, lift bond yields, and trigger risk aversion.

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The VIX Fear Index for the US stock market stands at 18.63 today, with fear sentiment intensifying in the crypto market.

According to Cboe data, the U.S. stock market's VIX Fear Index stands at 18.63 as of today, down 0.86 points from the prior reading of 19.49, marking a decline of approximately 4.41%. Separately, per Alternative data, the Crypto Fear & Greed Index is at 12 today (compared to 17 yesterday), indicating intensifying extreme fear sentiment.

5 minutes ago

Bank of Japan Board Member: Should Accelerate Pace of Interest Rate Hikes If Upside Inflation Risks Intensify

Bank of Japan (BOJ) Policy Board member Naoki Tamura stated that if upside risks to price growth intensify further, the BOJ should not hesitate to accelerate the pace of interest rate hikes or raise rates by a larger margin. He projected that the BOJ will implement interest rate hikes every few months until its policy rate reaches the neutral level of around 2%. (Golden Ten)

5 minutes ago

Crypto token M plunged over 80% in a short period, hitting a low near $0.5.

According to HTX market data, the token M saw a sharp short-term price plunge, with its decline once exceeding 80% and hitting a low of around $0.5, and is now trading at $0.54.

5 minutes ago

Blockchain data infrastructure firm Cambrian has closed a $6 million funding round, jointly led by Franklin Templeton and Polychain Capital.

Blockchain data infrastructure project Cambrian has closed a $6 million seed round, co-led by Franklin Templeton and Polychain Capital, with participation from Flow Traders, Selini Capital, and other investors. The project previously raised a $5.9 million pre-seed round led by a16z Crypto Startup Accelerator, bringing its total funding to $11.9 million. Cambrian currently provides institutional investors and AI Agents with real-time and historical data APIs covering on-chain yields, risks, lending markets, and trading activities, and plans to further build a verifiable data oracle network. Official data shows it has indexed over $4.5 billion in lending TVL, tracks more than 320,000 DEX liquidity pools, and currently supports Base and Solana, with plans to expand to additional ecosystems including Ethereum. The funds will be used to expand on-chain data coverage, accelerate oracle network development, and team recruitment.

5 minutes ago

Whale 0xbilly pulled off another "buy high, sell low" move, exiting with a $220,000 loss in a single day.

According to EmberCN’s monitoring, whale address 0xbilly liquidated 2,409 ETH in the early hours of today when ETH fell to around $1,569.5, worth approximately $3.78 million, with a total loss of roughly $220,000. Notably, this batch of ETH was purchased just one day ago for about 4 million USDC, at an average price of approximately $1,660.2. The address also previously bought 7,768.5 ETH at a high of $2,254 in March this year, valued at around $17.51 million, and exited via stop-loss four days later, incurring a loss of roughly $800,000.

5 minutes ago

Two whales opened a short position worth approximately $90 million on the S&P 500.

According to monitoring by Onchain Lens, two whale addresses are building short positions on the S&P 500, with a combined position of approximately $90 million. Details are as follows: Whale address "0x469" has opened 6,500 S&P 500 short positions, using 20x leverage, valued at around $48 million, with a liquidation price of $8,413.66. Whale address "0x4ff" has opened 5,686.66 S&P 500 short positions, using 7x leverage, valued at around $42 million, with a liquidation price of $8,358.13.

5 minutes ago

Japan’s 10-year government bond yields surged to 1.98% in December 2025, the highest level since the 1990s. It comes as markets braced for the Bank of Japan’s (BOJ) policy meeting on December 19.

The move has triggered a global rally in precious metals, with gold and silver surging 135% and 175%, respectively, since early 2023. Meanwhile, Bitcoin is under pressure as forced selling intensifies across Asian exchanges, highlighting a divergence in market reactions to Japan’s rate shift.

Japan’s Bond Yields Hit 1.98%For decades, Japan maintained near-zero interest rates, anchoring global liquidity through the yen carry trade.

Investors borrowed yen at a low rate to fund higher-yielding assets worldwide, effectively exporting ultra-low interest rates.

An expected 25-basis-point hike, raising the rate to 0.75%, may appear modest in absolute terms, but the pace of change matters more than the level.

BOJ Interest Rate Probabilities. Source: Polymarket “Carry trade at risk: Nobody knows when the real consequences will materialize, but this continued shift will likely drain liquidity from markets, potentially causing a ripple effect through margin calls and other forced deleveraging,” warned Guilherme Tavares, CEO at i3 Invest.

Analysts see the BOJ move as more than a domestic adjustment.

“When Japan’s yields move, global capital pays attention. Gold and silver aren’t reacting to inflation headlines. They’re pricing sovereign balance sheet risk. Japan isn’t a sideshow anymore. It’s the fulcrum,” noted Simon Hou-Vangsaae Reseke.

Gold and Silver Prices Surge Amid Rising Sovereign RiskPrecious metals have been closely tracking Japanese yields. According to Global Market Investor, gold and silver are moving almost perfectly in line with Japanese government bond yields. This suggests that precious metals are being used as a primary hedge against the rising cost of government debt.

Gold and Silver Prices Tracking Japan’s 10Y Bond. Source: Global Markets Investor on X “It’s not the yield itself, it’s what the move represents — rising sovereign risk, tighter global liquidity, and uncertainty about currency credibility. Gold responds as protection, and silver follows with more volatility,” commented analyst EndGame Macro.

The silver market is showing signs of speculative mania. The China Silver Futures Fund recently traded 12% above the physical metal it tracks, indicating that demand for leveraged exposure is outpacing the underlying asset.

⚠️ Silver market mania is an UNDERSTATEMENT:

The China Silver Futures Fund was trading +12% above the actual value of the silver it is supposed to track

Investors are buying the fund much faster than the silver behind is rising, a sign of SPECULATION. 👇https://t.co/8kAngXV9CH

— Global Markets Investor (@GlobalMktObserv) December 17, 2025 Investors are increasingly treating gold and silver as hedges against broader macro risks, rather than just inflation.

Bitcoin Faces Pressure as Carry Trades UnwindMeanwhile, the Bitcoin price is feeling the strain of tightening yen liquidity.

“Asia-based exchanges have seen persistent spot selling. Miner reserves are falling — forced selling, not choice…Long-term Asian holders appear to be distributing…Price stays heavy until forced supply is cleared,” wrote CryptoRus, citing XWIN Research Japan.

US institutions continue buying, with the Coinbase Premium positive, but forced liquidations in Asia and an 8% drop in Bitcoin hashrate have added downward pressure.

Bitcoin Price and Coinbase Premium. Source: CryptoQuantPast BOJ rate shifts have coincided with significant BTC declines, and traders are watching closely for further downside toward $70,000.

THE BANK OF JAPAN MIGHT BE BITCOIN’S BIGGEST ENEMY

Japan holds the most US debt.
Every time they hike, Bitcoin bleeds:

March 2024: -23%
July 2024: -30%
Jan 2025: -31%

Next hike: Dec 19
Next move: loading…

If the pattern repeats, $70K is in play. pic.twitter.com/R5916R702I

— Merlijn The Trader (@MerlijnTrader) December 14, 2025 The contrasting reactions of precious metals and Bitcoin highlight differences in risk positioning. Gold and silver are attracting safe-haven flows amid growing sovereign risk, while Bitcoin faces liquidation-driven price pressure.

Analysts note that future Fed rate cuts may offset the BOJ’s impacts, but the speed of the policy change is crucial.

Discussion around a possible Ripple IPO in 2026 and potential impact on the XRP price has picked up after Investing Visuals ranked major private companies by estimated valuation.

Specifically, the presentation places SpaceX at the top with a projected value of $1.5 trillion. OpenAI follows at $830 billion, while ByteDance stands at $480 billion. Anthropic comes in at $230 billion, Databricks at $160 billion, and Stripe at $120 billion. 

Projected Ripple IPO at $50B Meanwhile, Revolut holds an estimated valuation of $90 billion, with Shein at $55 billion. Notably, Ripple comes in next at $50 billion, matching Canva at the same level. Together, these companies account for a combined valuation of roughly $3.6 trillion.

Potential Largest IPOs | Investing Visuals If Ripple goes public at a $50 billion valuation, it will likely rank as the ninth-largest IPO of 2026. This figure also exceeds Ripple’s most recent private valuation. For context, in Q4 2025, Ripple completed a $500 million funding round that valued the company at about $40 billion. A move to $50 billion would represent a 25% increase.

Importantly, an IPO of that size would raise questions about XRP’s price outlook. While Ripple operates as a company and XRP exists as a separate digital asset, the markets have often linked the two. 

Specifically, when Ripple expands partnerships, gains regulatory clarity, or attracts institutional attention, XRP sentiment typically picks up. To understand how a $50 billion IPO could affect XRP, we asked Google Gemini for an assessment.

XRP Price if Ripple IPOs at $50B Google Gemini called 2026 a year when Ripple’s corporate growth and XRP’s market performance could become more connected, especially for institutional investors. With the assumption that Ripple lists publicly at a $50 billion valuation, Gemini presented a hypothetical price range for XRP.

According to Gemini, a public listing would represent Ripple’s move from a long-standing private company to a major public one. 

While XRP does not represent ownership in Ripple, the token benefits from activity within Ripple’s ecosystem. Increased visibility from an IPO could bolster confidence in Ripple’s technology and, by extension, support demand for XRP.

XRP Price Prediction if Ripple IPOs at $50B | Google Gemini In this scenario, Gemini suggested a bullish XRP price range between $8 and $15. One major factor behind this prediction is institutional sentiment. At present, XRP trades largely on retail demand and its role in cross-border payments. 

A successful IPO could send a message to traditional finance that Ripple’s business model has matured. Gemini pointed out that some institutional analysts, including Standard Chartered, have already mentioned $8 as a possible XRP target for 2026, assuming steady ETF inflows and lower regulatory risk.

Ripple Executives Downplay the Urgency of an IPO Despite these projections, Ripple executives have consistently downplayed the urgency of an IPO. CEO Brad Garlinghouse said in a July 2024 Fortune interview that going public represents only one step in Ripple’s journey, not a final goal. 

In March 2025, Garlinghouse told Bloomberg that an IPO was not a major priority, noting that Ripple continued to grow without needing public capital. Moreover, he also mentioned to Bloomberg that Ripple currently focuses on acquiring firms, not pursuing a public offering.

Ripple President Monica Long has suggested the same. In an April 2025 CNBC interview, she confirmed that Ripple had no plans to go public in 2025, pointing to billions of dollars in cash reserves. Later, at the Swell conference in New York in November 2025, she told Bloomberg that Ripple had no IPO plan and no timeline.

DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.

Yen Carry Trade Risk Edges Toward Bitcoin as Investors Underprice Japan’s Bond Market Shock