๐จ WTF is going on?
Japan's Nikkei just had the largest crash in history, Bitcoin went under 50k, and the US FED will hold an emergency meeting today.
TLDR: Leverage. A tiny thread (1/6) ๐งต
Japan's Nikkei just had the largest crash in history, Bitcoin went under 50k, and the US FED will hold an emergency meeting today.
TLDR: Leverage. A tiny thread (1/6) ๐งต
2/ Five days ago, the Bank of Japan (BoJ) increased interest rates from 0% to 0.25%. This early increase surprised the market.
Before this, anyone could borrow Yen at no interest, change them to USD, and buy stocks. Free money basically.
But there was a problem.
Before this, anyone could borrow Yen at no interest, change them to USD, and buy stocks. Free money basically.
But there was a problem.
3/ Because BoJ increased interest rates, the USD crashed vs Yen.
That meant traders borrowing billions in Yen to buy dollars could not cover their debt anymore.
What did they do? Sell the stocks they bought earlier with those dollars = stock market crash.
But there's more.
That meant traders borrowing billions in Yen to buy dollars could not cover their debt anymore.
What did they do? Sell the stocks they bought earlier with those dollars = stock market crash.
But there's more.
4/ This practice, called the Japanese carry trade, is worth $20 trillion dollars.
Only the Japanese hold $4 trillion in US stocks using this method and they are being margin called right now.
Much of this is fake money (leverage) and a bubble ready to pop.
What about crypto?
Only the Japanese hold $4 trillion in US stocks using this method and they are being margin called right now.
Much of this is fake money (leverage) and a bubble ready to pop.
What about crypto?
5/ Crypto is a risk asset. In times of panic (like now), people sell risk and rush to safety.
Usually that means cash and gold. Some hope that Bitcoin will also be seen as a hedge for such uncertain times.
Time will tell if that materializes in the future. One last thing.
Usually that means cash and gold. Some hope that Bitcoin will also be seen as a hedge for such uncertain times.
Time will tell if that materializes in the future. One last thing.
6/ I've seen this chart a lot which indicates this is a bear trap = one last crash before moon.
I am not convinced considering the macro. I hope we moon once the US FED reacts to pump the market. If so, I will sell & exit.
Follow @DU09BTC for more and share this thread!
I am not convinced considering the macro. I hope we moon once the US FED reacts to pump the market. If so, I will sell & exit.
Follow @DU09BTC for more and share this thread!
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