Analyzing the Relationship of the Yen Carry Trade to the Virtual Currency Market 　What are the causes of the global stock market decline and possible future scenarios? 　TSUDOI, an information community service for virtual currency Report in detail

The research team of TSUDOI, a virtual currency information community service operated by SIGMA Corporation (headquartered in Shibuya, Tokyo), will report on the causes of the global stock market decline in early August 2024, with analysis by NAKAMORI, Head of Research, Virtual Currency, which shows a unique trend The following is a description of the assumed scenario for the market.

First weekend of August 2024. The bitcoin market fell sharply. It fell from $65,400 on Friday to $49,500 at one point, a drop of about 24%. At the same time, the Tokyo stock market was also greatly affected, with the Nikkei Stock Average closing at 31,458 yen, down 4,451 yen (12%) from the previous weekend and the largest drop ever recorded.

The cause of this global stock market decline was the monetary policies of the Bank of Japan and the United States. Therefore, we summarized the topics in order from the end of July to the beginning of August.

▼ July 31: BOJ announces interest rate hike

The Bank of Japan decided to raise interest rates by 0.25% and to reduce its monthly purchases of JGBs by 400 billion yen each quarter to about 3 trillion yen from January to March 2026.

▼ August 2: Weak U.S. Economic Indicators Released

At the release of the employment report, the number of nonfarm payrolls rose by 114,000, well below the market forecast of 175,000, and the unemployment rate rose to 4.3%.

NAKAMORI, head of research at TSUDOI, pointed out the connection between the two major topics.

The Bank of Japan announced an interest rate hike, followed by weak U.S. economic indicators, which raised concerns about a slowdown in the economy. This is said to be the cause of the sharp decline in stock prices, as investment methods based on a weak yen against the dollar (dollar-yen carry trade) did not work and investors were forced to withdraw from the market.

*The "TSUDOI" service provides a more detailed report on the causes of this crash.

In what connection does the large stock price and exchange rate movements triggered by the drop in stock prices and the appreciation of the yen due to the mandatory carry trade levy affect the virtual currency market? NAKAMORI, head of research at TSUDOI, explains: "The virtual currency market is a 24-hour market.

As the virtual currency market trades 24 hours a day, funds holding virtual currencies such as Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) sold their assets over the weekend prior to the sell-off of risky assets as the carry trade unwinds (buying back Japanese yen). The initial sell-off triggered further chain-reaction asset sales, which had an impact beyond the nominal effect of unwinding. The highly leveraged nature of virtual currencies also triggered further selling."

The market's latest developments have led a growing number of experts to change their outlook for the U.S. economy from a "soft landing" to a "hard landing. On the other hand, there are still many experts who believe that a "soft landing" scenario, in which the economy slows gradually without deteriorating sharply, is the most likely scenario.

Another factor that may be leading to a soft landing is that, although the Bank of Japan's stance on raising interest rates remains unchanged, Bank of Japan Deputy Governor Shinichi Uchida stated in a speech on August 7, "We will not raise interest rates in a situation where financial and capital markets are unstable.

NAKAMORI, head of research at TSUDOI, urges investors to keep a close eye on market trends.

The Bank of Japan and U.S. monetary policy are the main factors behind the market decline," said Nakamori. The virtual currency market was also affected by this and fell sharply in a short period of time. However, if U.S. interest rates continue to be lowered, demand for virtual currencies as risk assets may increase in the virtual currency market. It will be important for investors to pay close attention to market trends, while maintaining risk diversification and a long-term perspective."

In other words, although the virtual currency market was also affected by the global stock market decline in the short term during this down market, we believe that the virtual currency market may be a unique trend. In this article, we discuss the possible scenarios, citing the following three points: "1.

1. increased demand for virtual currencies as risk assets

2. virtual currencies as a hedge against inflation

3. the impact on individual stocks.

Based on his own analysis, NAKAMORI, Head of Research at TSUDOI, explains the scenarios in detail in the following three points.

1) Increased demand for virtual currencies as risk assets

When U.S. interest rates are lowered, investors tend to increase their demand for risk assets. This is because in a low interest rate environment, yields on safe assets (e.g., US Treasuries and cash) decline and money flows into risk assets (e.g., stocks and virtual currencies) in search of higher returns. Virtual currencies such as Bitcoin are also affected by this and may rise in price. 2.

2) Virtual Currency as an Inflation Hedge

Interest rate cuts can often cause inflation. As inflation drives down the value of legal tender, investors turn to virtual currencies such as bitcoin as a means of preserving value. Bitcoin may serve as "digital gold" and increase demand as an inflation hedge.

3. Impact on Individual Issues

For projects that leverage the high yield and stability of U.S. Treasuries, such as stable coins issued against U.S. Treasuries or crypto asset projects that tokenize interest rates on U.S. Treasuries, caution should be exercised as profitability may decrease if U.S. interest rates are lowered.

*The TSUDOI service also provides detailed reports on the trends of individual issues.

The virtual currency market is now closely intertwined with political and economic developments in all areas on a global level.

On the other hand, there are also scenarios that are unique to virtual currencies.

In order to make the right investment decisions for virtual currencies, there is a high demand for TSUDOI, one of the few virtual currency information services in Japan, and we recognize once again the need to further improve the accuracy of our analysis capabilities.

What is the carry trade?

Carry trade is a method of earning a profit margin by borrowing funds in a currency with a low interest rate (e.g., Japanese yen) and investing them in a currency with a high interest rate (e.g., US dollar). The objective is to earn a profit by reinvesting the borrowed funds in high-yielding assets.

How the Yen Carry Trade works

(1) Borrowing funds in Japanese yen with low interest rates

　 For example, borrowing funds in Japanese yen pays only 1.5% interest.

2. convert borrowed yen into U.S. dollars

　 Convert borrowed yen into U.S. dollars and invest in U.S. dollars with high interest rates.

3. leverage by reinvesting

　 Leverage by borrowing more yen using the investment in U.S. dollars as collateral and repeating the process.

TSUDOI

TSUDOI is a virtual currency information community service operated by SIGMA Corporation. TSUDOI is a real-time information service operated by SIGMA Corporation. The service features news distribution, commentary on each issue, and project evaluations from a professional perspective. The site also publishes a number of study contents for beginners.

The virtual currency industry is said to be rife with scams and misinformation, making it difficult to keep up with valuable information in real time. Furthermore, most new information is based on English-language articles. The service was launched in October 2022 to promote the expansion of services to meet the needs of virtual currency investors in Japan.

Service Logo

Main Features

The service provides a report on about 10,000 stocks, picking up top stocks of interest from three major perspectives: (1) top stock analysis, (2) mid-cap stock analysis, and (3) new stock discovery analysis.

The company is particularly strong in reports aimed at altcoin investment. It is the only one and only virtual currency information community service that independently picks up and introduces hot stocks and big holes in the market.

The service also offers "24-hour support chat," "research requests," "manual requests," and "Zoom interviews" to allow users to ask questions directly to experts in the virtual currency industry, in addition to distributing information.

URL: https://tsudoi-community.com

Operating company: SIGMA Corporation

Location : Shibuya-ku, Tokyo

Representative Director: Koji Muto

URL ： https://www.sigmainc.co.jp

Features of TSUDOI's report format (1) Analysis of top issues (2) Analysis of mid-cap issues (3) Analysis of new issue discovery

1 Top Issue Analysis

TSUDOI defines the top 50 stocks in terms of market capitalization as "Top Issues.

TSUDOI identifies the top 50 stocks based on their market capitalization as of Thursday of each week and analyzes them in weekly reports. From among these top stocks, a more in-depth look at the stocks whose token prices have soared the most during the period provides a clue to the latest developments in the virtual currency market.

2 Analysis of mid-cap stocks

Focusing on stocks in the top 51 to 400 in terms of market capitalization, this report picks out stocks to watch closely. The analysis is based on search trends, which can lead to the provision of information useful for identifying stocks that may lead the market in the future.

3 New Issue Discovery Analysis

In order to preemptively pick up stocks that have the potential to lead the market in the future, the report uses two analysis methods.

The first is "new stocks newly ranked in the 51st to 200th positions in the market capitalization ranking.

The second is "new stocks in the portfolios of major VC firms that have risen in market capitalization during the period.

By reporting on these stocks from a relatively early stage and keeping a close eye on trends, we will be able to conduct ongoing research. This will reduce the risk of investing in new stocks as much as possible and provide information to secure stocks that will grow in the future.

Representative of SIGMA: Koji Muto

Koji Muto is one of the early adopters in Japan who entered the virtual currency industry in 2012.

In 2013, he was an early investor in a number of crypto assets, including Ethereum, currently the second largest crypto asset by market capitalization, and Cardano, currently the eighth largest. Since the early days, he has been educating the public about virtual currencies not only in Japan but also in China, Singapore, and other Asian countries, and has created many virtual currency chieftains.

In April 2017, with the revision of the Funds Settlement Law, he founded Xtheta Inc. and became the third fastest company in the Kinki region to be registered with the FSA in December 2017 (in March 2021, the company name was changed to Sakura Exchange Bitcoin). He was also in charge of new business development.

He then launched SIGMA and released the "TSUDOI" service, aiming to become Japan's largest crypto asset and membership information distribution platform.

Representative of SIGMA: Koji Muto

Head of "TSUDOI" research: NAKAMORI

With extensive experience in the blockchain industry, Nakamori leads TSUDOI's research department, and has been working in the virtual currency industry since 2014, initially involved in fundraising-related work for token-issuing projects. Later, in 2017, he started supporting virtual currency related startup companies. He has been involved in advisory and consulting work and has helped more than 10 companies with successful fundraising projects.

From 2020 onward, he helped launch staking provider businesses in anticipation of the transition to staking major virtual currencies such as Ethereum and Cardano. During the same period, he supported the development of decentralized wallets and promoted marketing strategies for the Japanese market, contributing to the company's performance as one of the top 10 staking providers in the world.

Recognizing the need to disseminate useful information to investors, he joined TSUDOI as the leader of the research department. He is committed to using his extensive expertise and experience to gather information with the goal of delivering reliable information to investors and supporting them in making wise investment decisions.

Head of TSUDOI Research: NAKAMORI