Crypto investors usually watch Fed meetings closely. This week, however, the key decision may come from Tokyo.
The Bank of Japan (BOJ) is expected to raise its policy rate from 0.75% to 1% at its meeting on Tuesday. If it happens, this would mark Japan’s highest interest rate level since 1995. From a distance, it may look like an ordinary central bank decision; for markets, the picture is far more complicated.
Yen shorts at record levels
According to CFTC data, leveraged funds’ speculative short positions on the yen climbed above 115,000 contracts in the week of June 9. This is the highest level seen since November 2017. These positions are essentially large-scale bets that the yen will continue to weaken.
If the BOJ raises rates as expected and then signals a shift toward tighter monetary policy, the rapid closing of these short positions could quickly move to the top of the market agenda. Closing yen short positions would push the yen higher; that would directly threaten yen-funded carry trade positions.
The logic of the carry trade is simple: investors borrow in low-yielding yen and invest in higher-yielding risk assets. For years, this strategy has been one of the mechanisms supporting the bull run in Wall Street and developed market bond markets.
Is the July 2024 scenario back on the table?
The current setup bears a striking resemblance to what happened last year. When the BOJ raised rates in July 2024, yen shorts were also at record levels. Those who remember what followed know the sequence well: the rapid closing of short positions triggered a sharp rally in the yen, Japan’s Nikkei index came under pressure, Wall Street turned volatile, and Bitcoin fell from $65,000 to $50,000 in just one week.
On the surface, this week’s setup looks similar. Of course, no cycle is an exact copy of another; but the positioning structure alone gives risk managers enough reason to watch closely.
BOJ Governor Ueda’s tone will be decisive
If the rate hike comes in line with expectations and BOJ Governor Kazuo Ueda uses cautious language, markets will likely remain calm. The real breaking point could come if Ueda signals that rates may rise faster, or points clearly toward levels above 1%. In such a scenario, the yen could strengthen sharply; that would weigh on global risk appetite.
Crypto has historically been one of the asset classes most sensitive to sudden liquidity tightening. In scenarios like this, it is usually among the first markets to feel the impact.
Other key developments this week
While the Bank of Japan decision stands out as the most critical event of the week, the broader calendar also looks busy.
On Monday, South Korean financial giant Hanwha Investment & Securities invested $400 million in Dunamu, the operator of the country’s largest crypto exchange, Upbit. The deal gives Hanwha a 10% stake in Dunamu. Around $4.5 million worth of STRK token unlocks are also expected.
On Tuesday, alongside the Bank of Japan’s interest rate decision, approximately $8 million worth of ARB token unlocks are scheduled.
On Wednesday, the Eurozone’s annual inflation data, CPI, will be released. Both the forecast and the previous reading stand at 3.2%. At 21:00, the Fed will announce its interest rate decision, with markets expecting no change from the current 3.75% level. The FOMC press conference will follow at 21:30.
On Thursday, U.S. weekly jobless claims will be released at 15:30. The market forecast is 225,000, while the previous reading stood at 229,000.
On Friday, U.S. stock markets will be closed for Independence Day. Binance will also delist COS, D, HIGH and MBOX on the same day.
