The Bank of Japan's hawkish turn to leverage the appreciation of the yen, and many types of assets go with the flow

The Bank of Japan recently released hawkish signals in its policy statement, triggering expectations of the yen’s appreciation against the dollar. Behind this exchange rate change lies a profound impact on the global crypto market - the unwinding effect of leveraged carry trades is driving the rebound of risky assets such as Bitcoin. As the yen strengthens against the dollar, the low-cost financing arbitrage strategy, which once relied on the yen’s depreciation to sustain itself, faces adjustments, and the market is undergoing a subtle shift from risk aversion to risk appetite.

Bank of Japan’s policy shift triggers expectations of yen appreciation

The Bank of Japan has recently kept its overall monetary policy framework unchanged, but has clearly shifted to a more hawkish rhetoric in the wording of its policy statements. This change in stance was immediate in the exchange rate market, where the USD/NZD (JPY) movement came under pressure, with the yen strengthening slightly against the US dollar. This appreciation trend has intensified significantly since after noon EST, and some market participants pointed out that this trend is characterized by possible official intervention in the foreign exchange market.

Over the past few months, the continued depreciation of the yen has become a source of some kind of “hidden leverage” - Japan’s low interest rates and weak yen have created a cheap financing environment, and a large number of traders have taken advantage of this condition to build cross-border arbitrage positions. When the yen suddenly appreciates, the economic foundation of this arbitrage framework is shaken.

Leveraged arbitrage unwinding, Bitcoin and crypto stocks rebounded

According to the data, on the day of the hawkish signal released by the Japanese authorities, Bitcoin quickly rose 2% after experiencing early lows, approaching the $91,000 mark at one point. Although the latest price has corrected to the $83.69K range (-6.38% in 24 hours), the rebound at that time was driven precisely by the overall unwinding of carry trades - when cheap yen financing is no longer so cheap, crypto positions based on this condition need to adjust direction.

The stock price performance of crypto listed companies more intuitively reflects this market psychological change. Bitcoin miners such as Hut 8 (HUT), TeraWulf (WULF), and CleanSpark (CLSK) all opened in the red, but these stocks ended up up 5%-10% as market sentiment shifted. MicroStrategy (MSTR), one of the world’s largest corporate Bitcoin holders, also rebounded 5% from Friday’s lows. Even crypto exchange Coinbase (COIN) has narrowed its losses to just 1%. At the same time, the U.S. stock market as a whole also reversed its early decline, with the Nasdaq up 0.6%.

Chain fluctuations in the precious metals, NFTs, and derivatives markets

The repricing effect of risk assets brought about by the appreciation of the yen is not limited to the crypto field. The precious metals market showed a clear linkage: silver surged more than 5% to $101.44 per ounce, and gold rose 1.5% near the $5,000 mark. Platinum and palladium rose even more, both exceeding 6%. The rise in these traditional safe-haven assets reflects the market’s extensive digestion of exchange rate fluctuations and policy shifts.

Within the crypto ecosystem, NFT projects such as Pudgy Penguins have also shown strong market resilience. The project has established diversified revenue streams through a phygital strategy, including more than $13 million in retail sales and more than 1 million units sold. Its game Pudgy Party has been downloaded over 500,000 times in two weeks, while the widely distributed PENGU token has been distributed to over 6 million wallets. This shows that projects with strong practicality and ecological support can maintain relatively stable performance during exchange rate adjustments.

The crypto derivatives market has shown a defensive layout - open interest has declined, traders have a growing preference for protective put options and short positions, and volatility remains subdued. At the same time, the Optimism community approved a 12-month plan to use about half of Superchain ecosystem revenue to buy back OP tokens starting in February, trying to hedge market pressure through liquidity support - although token prices are still facing downward pressure after the launch of this plan.

Overall, the Bank of Japan’s policy fine-tuning has sent ripples through global asset markets, from currency pairs to crypto assets, from individual stocks to derivatives, and the market is re-exploring the balance in the context of the appreciation of the yen and the adjustment of the USD/NZD trend.