When the New Carry Trade Unravels: Market Timing the Unwinding

The carry trade setup looks deceptively comfortable right now—but history suggests these positions can collapse in hours, not weeks. Traders who've stacked leverage into yield-chasing strategies face a critical vulnerability: what happens when risk sentiment flips?

The math is simple. You borrow cheap, deploy into higher-yielding assets, pocket the spread. Works beautifully until it doesn't. A single catalyst—geopolitical shock, inflation surprise, central bank pivot—can trigger forced liquidations across the board.

Cryptoassets aren't immune. When volatility spikes and margin calls hit simultaneously, the unwinding becomes brutal. We've seen it in 2022, we're watching the patterns form again. The real question isn't whether it unwinds, but how fast.