How a crisis in Japanese bonds is putting pressure on global liquidity and Bitcoin

Source: PortaldoBitcoin Original Title: How a Crisis in Japan’s Bonds Is Pressuring Global Liquidity and Bitcoin Original Link: The turbulence in Japan’s bond market on Tuesday spread across global markets, dragging Bitcoin and cryptocurrencies down as higher yields on Japanese bonds threatened to undo a traditional source of cheap global financing.

The Nikkei index fell 2.5%, and the S&P 500 declined more than 2% during U.S. trading hours. Bitcoin dropped 3.3% in the last 24 hours, to $89,300, according to CoinGecko data.

Meanwhile, gold rose as much as 4%, hitting an intraday record of $4,866 per ounce.

“The wave of selling clearly exceeded market expectations, turning into a widespread shock for global financial markets,” said Tim Sun, a senior researcher at a crypto platform, commenting on the situation.

For years, Japan’s ultra-low interest rates helped anchor global borrowing costs, encouraging capital flows into higher-risk assets, including cryptocurrencies.

Tensions in Japan’s bond market threaten to reverse this dynamic, restricting global liquidity.

“I believe markets are down because the Japanese bond market experienced a six-standard-deviation swing in the last two days,” said U.S. Treasury Secretary Scott Bessent during the World Economic Forum in Davos.

In market terms, a six-standard-deviation swing refers to an exceptionally large price variation relative to recent norms, highlighting the severity of the decline.

Movements of this magnitude are rare and typically focus attention on monetary policy risks.

“Japan has two options: tighten monetary policy and reduce global liquidity or do nothing while the currency and bond markets collapse,” said a market analyst on Tuesday. “Neither option is good for U.S. stock markets, which have a strong presence of tech companies.”

The Bank of Japan is likely to “buy time” through bond purchase programs to prevent a market collapse, according to analysts. “Compared to currency depreciation, a government bond market collapse is a problem Japan is much less equipped to handle,” experts say.

Bitcoin’s reaction suggests it remains closely tied to global liquidity conditions, with its long-term appeal depending on how central banks handle the crisis.

“If the Bank of Japan is forced to print money to buy bonds… that will effectively signal that the central bank has prioritized debt solvency over the value of the fiat currency,” said an analyst. “This is precisely the core narrative behind Bitcoin as a non-sovereign, inflation-resistant asset.”

Whether this narrative will be reaffirmed depends on how the Bank of Japan responds, as investors weigh the short-term market stability against the risk of reduced global liquidity.