Analysis: The strengthening of the yen may lead to a negative feedback loop for global risk assets, and crypto traders need to remain cautious

The yen has risen 2.4% against the dollar since Thursday to 145 yen per dollar, showing a preference for safe-haven currencies. Similar yen strength triggered the unwinding of carry trades in early August, leading to sharp fluctuations in risk assets including Bitcoin. Bitcoin prices fell from about $70,000 to $50,000 in the eight days before August 5, and then rebounded to $60,000 as the dollar rebounded against the yen. Both well-known trader Simon Ree and Goldman Sachs' head of crypto trading Andrei Kazantsev pointed out that the yen's strength could lead to a negative feedback loop for risk assets around the world. According to ING's analysis, the yen's rebound could change market behavior and increase the willingness to buy when the yen is weak, thereby increasing the risk of a stronger yen. The unwinding of carry trades is likely to continue in the coming weeks as the Federal Reserve's mid-September interest rate decision meeting approaches. Arnim Holzer, global macro strategist at Easterly EAB Risk Solutions, said that if the Fed cuts interest rates by 50 basis points, the market may rise first and then fall, as concerns about the economy and the strength of the yen will re-trigger the unwinding of carry trades. (Coindesk)