Macro de-risking: Japan 40-year JGB yield breaks 4% on fiscal fears, Bitcoin and equities sell off as duration shock hits risk assets
Digital Asset Market: Bitcoin fell below $90,000 in U.S. morning trading, dropping 3% amid a global selloff in risk assets following a collapse in Japan’s government bond market and renewed trade threats from President Trump against the European Union. ETH was hit even harder, falling more than 7% over the past 24 hours and dropping below $3,000 for the first time since early January, making it the worst-performing major cryptocurrency. Altcoins are underperforming as well, pushing bitcoin’s dominance in the overall crypto market to 59.8%. Analysts expect further volatility and anticipate that altcoins will be more negatively impacted in the short term.
This happened, while Billionaire Michael Saylor’s MicroStrategy announced it purchased about $2.13 billion worth of bitcoin between January 12 and January 19, acquiring roughly 22,305 bitcoins and bringing its total holdings to 709,715 as of January 19. Despite these significant purchases, the company’s shares fell 6.6 percent as bitcoin’s value dropped 2.4 percent, highlighting the stock’s sensitivity to cryptocurrency price movements. The recent purchases were funded through an at-the-market offering program. Earlier this month, Strategy reported an unrealized loss of $17.44 billion on its digital assets for the fourth quarter due to declines in bitcoin’s price, further impacting investor sentiment amid ongoing crypto market volatility.
Macro Economics: Japanese government bonds experienced a significant selloff on Tuesday, with yields on the 40-year bond surpassing 4 percent for the first time since its 2007 debut, marking a record high for any Japanese sovereign debt maturity in over thirty years. This sharp jump in 30- and 40-year yields, spurred by investor concerns over Prime Minister Sanae Takaichi’s proposal to cut taxes on food without providing a clear funding source, reflects mounting fears about increased government spending, inflation, and potential fiscal instability. The lackluster 20-year bond auction and record selling by Japanese insurers have further highlighted doubts about Japan’s ability to manage its world-leading public debt burden, stirring fears that rising yields could prompt broader selling. Despite assurances from government officials, including Finance Minister Satsuki Katayama, that Japan remains committed to fiscal sustainability and economic strength, the sustained climb in yields has made Japanese bonds more attractive to foreign investors, who now account for a significant portion of market activity. However, this heightened interest comes amid increased market volatility, particularly as Japan heads toward a snap election in February and opposition parties pursue alternative tax-cut plans. With the yen weakening and Japanese stocks falling, there is speculation that the Bank of Japan may need to step in with market interventions should the bond rout intensify or broader contagion risks emerge.
Equities: U.S. stocks plunged on Tuesday after President Trump escalated tensions by threatening new tariffs on NATO countries that oppose the U.S. purchase of Greenland, causing investor panic and triggering a shift away from U.S. assets. The Dow Jones fell by over 500 points, while the S&P 500 and Nasdaq also saw sharp declines, with market fear surging, as reflected in a spike in the VIX. Trump announced that tariffs on certain imports from NATO members would start at 10 percent in February and could rise to 25 percent by June if a deal to purchase Greenland is not reached. He also threatened dramatic tariffs on French wines and criticized the U.K. over its handling of the Chagos Islands, prompting worries that these moves would intensify trade tensions and inject uncertainty into global markets. Experts have noted the risk of using tariffs for non-economic goals as US stocks saw renewed declines, with the Dow and S&P 500 dropping about 1.2 percent and the Nasdaq nearly 1.5 percent. Trump’s threat of higher tariffs on European goods and France’s wine followed EU warnings of major retaliatory measures, while Greenland’s leader urged preparation for possible conflict. A global bond sell-off led by Japan pushed US Treasury yields to four-month highs, the dollar weakened, and precious metals surged as investors fled riskier assets, dragging down tech giants like Nvidia and Broadcom. Markets are now focused on the upcoming World Economic Forum in Davos, where Trump is expected to address the crisis, as well as a potential Supreme Court ruling on his tariff powers and key corporate earnings reports, including from Netflix.
The Fed and US Treasury: President Donald Trump is expected to announce his pick for the next Federal Reserve chair as soon as next week, according to Treasury Secretary Scott Bessent, speaking at the World Economic Forum in Davos. The selection process, which began in September with eleven candidates, is now down to four, all of whom Trump has personally interviewed. While Bessent did not confirm the finalists, the likely contenders include Kevin Hassett, Kevin Warsh, Christopher Waller, Michelle Bowman, and Rick Rieder, with prediction markets currently favoring Warsh. Trump and other officials have criticized current chair Jerome Powell, who is facing controversy and a Justice Department subpoena. Although Powell’s term as chair ends in May, he could remain as a Fed governor until 2028.
Geopolitical: Tensions have escalated within NATO after President Trump renewed his push for the United States to acquire Greenland, arguing that it is crucial to American national security and deterrence against rivals such as Russia and China. This comes amid backlash over his imposition of heavy tariffs on French wines and criticism of the United Kingdom’s decision to hand over sovereignty of the strategically important Chagos Islands to Mauritius, a move he labeled as great stupidity and total weakness.” Trump claims such territorial concessions highlight the need for U.S. control over Greenland, while Denmark has responded by increasing its military presence there. The controversy over Diego Garcia, part of the Chagos Archipelago and home to a vital UK-US military base, remains central as Washington and London navigate longstanding disputes over sovereignty and defense commitments in the Indian Ocean.
View from our desk
Bitcoin stalls at $94k as macro beta reasserts itself
Bitcoin’s repeated rejection around the $94,000 zone is a reminder that the market still lacks broad, price-insensitive sponsorship. Even with continued headline buying from large corporate treasuries, the tape has struggled to convert demand into sustained follow-through, leaving rallies vulnerable to fast de-risking. The result is a familiar setup: BTC strength increasingly depends on stable rates and calmer risk sentiment, while “dominance” gains are driven more by altcoin underperformance than by fresh net inflows.
Japan’s long-bond shock is tightening the global risk budget
Today’s selloff in Japan’s ultra-long JGBs pushed long-end yields to fresh records, and the spillover into U.S. rates is the real signal. When Japan’s term premium reprices, global duration and equity risk premia tend to reprice with it, compressing the room for leveraged risk to carry. In this environment, Bitcoin behaves less like an idiosyncratic growth asset and more like a high-volatility macro expression, which helps explain why upside attempts keep failing at obvious technical levels.
Resource geopolitics: Venezuela and Greenland read as high risk, low visibility
Washington’s push to extract economic leverage from Venezuela’s oil sector, alongside escalating Greenland-linked trade threats, is a reminder that geopolitical optionality is being priced with wider error bars than markets were discounting a month ago. Venezuela’s energy upside remains constrained by legal, operational, and capital-commitment realities even after dramatic political developments, while Greenland’s strategic value does not eliminate the infrastructure and alliance-friction problems that slow monetization. Net, these are asymmetric trades for policymakers but messy ones for investors: high headline velocity, low confidence on timelines, and a meaningful tail risk of broader trade and risk-off spillovers.
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Bitcoin has topped this cycle. One more push into March and we are done
Excellent breakdown of how Japan's fiscal drama is spilling over into crypto. The fact that Bitcoin's acting more like a high-beta macro asset than an uncorrelated store of value is telling. Saw this playin out in 2022 too when rates started climbing. The dominance gain from altcoin weakness rather than fresh inflows is a subtle but important distinction that most miss.