With more institutional exposure, macro is currently affecting crypto, which has shown itself increasingly reactive. As a 24/7 tradable asset with now heightened institutional interest, we need to respect and understand the current macro environment with its largest drivers.

Japan - Yen Carry Trade

The market expects the Bank of Japan to increase rates to 0.75%.

In 30 years the rate has not been pushed higher. What stands behind a lot of liquidity?

In our Directive on Mean Reversion (LINK) we covered Carry Trade Unwinds of the last 3 decades.

To sum it up quickly and simply what stands behind it:

• Borrow Yen at low to zero interest rates

• Swap to dollars, stocks, bonds, and crypto

• Pocket the difference between them

And as borrowing becomes more expensive, Investors and Funds need to buy Yen to repay the Bank of Japan.

This sets up Yen for demand, exacerbating pressure to repay early, front-running each other.

The high-risk, 24/7 available assets go first: Crypto’s liquidity dries up - it is prompting the unwind already:

Investors sell crypto - among other assets - to repay loans, create selling pressure, volatility, and price declines.

The Fed

Last week’s meeting gave us the priced-in 25bps rate cut.

Upon further review and the aftermath, the tone remained cautious looking at 2026,
While the Fed’s official numbers imply just one cut across 2026,
The markets disagree and expect up to three cuts, factoring in the Fed’s chair replacement.

This discrepancy increases uncertainty, reduces risk appetite, thus it most likely leads to near-term consolidation with slight downward bias - coupled with heightened volatility.

The hawks still suppress the skies, and the doves can’t fly.

AI narrative

The overall AI trade has potentially turned deflatory:

The bottleneck towards profitability recently has largely become energy dependence and effective monetization, amidst more efficient alternative models driving into the markets.

As hyperscalers (large cloud computing companies) delay spending and switch to cheaper options, this has put downward pressure on semiconductor stocks and AI-related technology sectors.

That does not mean a bubble is about to blow up, but crypto gets affected!

While crypto remains sensitive to wider sentiment, it can also benefit again from more available capital and mindshare.

There are two possible paths here:

1. If the AI sector unwinds radically, that’s extremely dangerous to crypto.

2. If it stalls for considerable time or even bleeds slowly, crypto can benefit.

Support for it:

The CTAs (Commodity Trading Advisors) selling prognosis by Goldman Sachs,
Trade based on market momentum signals (mostly-trend following investment funds) -
are in line with ours and hint at starting to contribute to potential (AI) unwinds.