Recently, Bitcoin fell below $80,000 from $90,000, and market sentiment is tense. But upon closer inspection, the real source of pressure actually comes from the rapid rise in Japanese government bond yields—an easily overlooked signal that is reshaping global capital flows.

**Why Japanese interest rates are the key switch for global funds**

Over the past few decades, Japan has been the cheapest source of funding in the global financial system. The near-zero or even negative interest rate environment has created opportunities for institutional investors: borrow low-cost yen, exchange it for dollars, and invest in high-yield assets—U.S. Treasuries, U.S. stocks, and even cryptocurrencies—profiting from the interest rate differential. The scale of this strategy is staggering, conservatively estimated at several trillion dollars, and in extreme cases could reach as much as $20 trillion (equivalent to the combined GDP of Japan, Germany, and the UK).

About $3.4 trillion of this flows into the cryptocurrency market, serving as a vital liquidity support.

Now, the situation has changed. The 10-year Japanese government bond yield has risen to 1.86% (the highest since 2008), and the 2-year yield has also broken above 1%. This means the cost of borrowing in yen has increased significantly, severely compressing arbitrage opportunities. Institutions have no choice but to unwind risk assets, converting back into yen to repay debts.

**Why cryptocurrencies are the first to be affected**

At the top of the risk asset pyramid, the crypto market is most sensitive to liquidity changes. When Japanese government bond yields rise, arbitrage funds immediately withdraw from digital assets like BTC. This chain reaction propagates the fastest and most directly.