HONG KONG — Last week’s sharp crypto sell-off was less a replay of 2022’s scandals and more a macro-driven unwind spilling over from traditional finance, according to market participants at Consensus Hong Kong 2026.

“After Oct. 10th, a lot of people had already reduced risk,” said Fabio Frontini, founder of Abraxas Capital Management. “This is just a spillover from TradFi entirely… it’s all interconnected now.”

Panelists pointed to the unwinding of yen carry trades as a key catalyst. Thomas Restout, group CEO of B2C2, described the mechanics: investors borrow in low-interest-rate currencies like the yen and deploy that capital into higher-yielding or risk assets, including bitcoin, ether, gold and silver.

“What does that mean? That means people borrow currencies that have cheap interest rates, and they use it to put on carry trades,” Restout said.

The yen carry trade refers to investors borrowing Japanese yen at low interest rates, converting it into other currencies then investing into higher-yielding assets. However, should yen strengthen, investors have to buy it back to repay loans, causing the trade to "unwind" and trigger market volatility.

As yen rates rose, borrowing costs increased. At the same time, higher volatility triggered steeper margin requirements. “In metals, it went from 11% margin requirements to 16%," Restout added. This forced some players to unwind positions as collateral demands surged.

The result was broad pressure across risk assets, not just crypto.

Exchange-traded funds (ETFs) tracking bitcoin also saw heavy volumes during the downturn, though panelists pushed back on the idea of full-scale institutional capitulation. At their peak, bitcoin ETFs totaled roughly $150 billion in assets; today they still hold around $100 billion, Restout said. Net outflows since October are about $12 billion—significant, but modest relative to total assets.

“If anything, it means that the money is changing hands,” Restout said, suggesting rotation rather than wholesale exit.

Looking ahead, Emma Lovett, credit lead for Market DLT at J.P. Morgan, said 2025 marked a regulatory inflection point. A more permissive U.S. backdrop has accelerated experimentation beyond private, permissioned blockchains toward public chains and stablecoin settlement.

“What we started to see in 2025… is the introduction of using public chains and… stable coins for the settlement of traditional securities,” she said, signaling a deeper convergence of TradFi and crypto infrastructure in 2026.