Top 3 reasons for today’s crypto market crash (Jan. 20)

The Yen is rising and cryptocurrencies are falling as Bitcoin slips while global risk trades unwind.

The crypto market continues its downturn with Bitcoin (BTC) and most altcoins being in the red, and the valuation of all coins falling by 2% over the last 24 hours to $3.08 trillion.

• Bitcoin price dropped to $90,000, down from the year-to-date high of $98,000
• Ethereum (ETH) fell by 4% to $3,000.
• Other top tokens like Solana, Dogecoin, and Monero fell by over 3%.

Japanese bond yields soar 

Meanwhile, Japanese government bonds jumped to multi-year highs as signs emerged that the Bank of Japan will maintain a hawkish tone this year.

Economists expect the bank to continue hiking rates to curb the ongoing yen crash. In a note, Citigroup analysts predicted that the bank will deliver three hikes this year, pushing the headline rate to 1.50%, the highest level in decades.

Odds of more hikes have jumped after the Japanese yen slumped and after Prime Minister Sanae Takaichi pledged more tax cuts if she wins the February election.

Higher interest rates in Japan are risky for Bitcoin and other risky assets due to the unwinding of the years-long carry trade. Carry trade is a situation in which investors borrow in a low-interest-rate country and lend in a higher-interest-rate country.

Trade war between US and NATO members 

President Donald Trump’s decision to impose new tariffs on key allies, including the United Kingdom, Norway, Sweden, and Denmark, is also hurting cryptocurrencies.

The new tariffs stem from escalated tensions with Europe and NATO allies after Trump launched a barrage of social media posts asserting U.S. control over Greenland, just days before attending the World Economic Forum in Davos.

The campaign, which included taunts aimed at French President Emmanuel Macron and Britain, raised fears of a renewed transatlantic trade war and fresh strains on the NATO alliance.

The remarks followed Trump’s weekend announcement of tariffs on European allies who oppose his stance on Greenland, prompting EU leaders to consider retaliatory duties on up to $108 billion in U.S. imports.

Trump has said he intends to “get” Greenland for the U.S., by force if necessary, a claim rejected by Denmark and Greenland’s government, which warned that any such move would violate international law and could effectively end NATO’s postwar security framework.

The EU, on the other hand, has threatened to impose reciprocal tariffs worth over €93 billion, a move that will lead to a downward spiral in relations.

The Supreme Court is expected to deliver a ruling on the legality of Trump’s tariffs this week. Data on Polymarket shows that most traders believe that the court will rule against these tariffs, and reports indicate that the ruling won’t bring much clarity, no matter what it is.

Falling interest in the futures market 

The crypto market crash also occurred as demand in the futures market continued to fall. CoinGlass data shows that the futures open interest dropped to $136 billion, down from this month’s high of $146 billion. 

Falling open interest is bearish because it signals weak demand from investors in the futures market. In most cases, cryptocurrencies drop when open interest is falling, and liquidations are rising.