Roughly $640 million in cryptocurrency liquidations followed after the 10‑year Japanese Government Bond (JGB) yield reached a 17‑year high, sharply repricing global risk assets. Dated October 8, 2025, the move coincided with a decisive shift in Japan’s monetary stance and an immediate unwinding of long yen carry positions, compressing liquidity for leveraged crypto traders.
How the JGB spike triggered the crypto liquidation
The 10‑year JGB yield climbed to 1.70% (peaking at 1.87%), driven by the Bank of Japan’s retreat from ultra‑loose policy and the earlier abandonment of Yield Curve Control in 2024. Yields rose across the curve — the 20‑year reached 2.88% (peaking at 2.891%), the 30‑year about 3.20% (3.195%), and the 40‑year hit 3.695% — prompting rapid capital repatriation to Japan. Year‑to‑date, the 10‑year had increased by 58 basis points, and market pricing put better than a 50% chance of a December 2025 rate move to 0.75%.
The immediate transmission to crypto came through the unwind of the yen carry trade (≈¥20 trillion). As the cost of borrowing yen rose, previously profitable cross‑border financing became uneconomic, forcing institutions and leveraged traders to close external positions and move funds back into higher‑yielding domestic debt. The liquidity drain amplified downside moves in digital assets and exposed concentrated leverage in futures and perpetuals markets.
Market data show the cascade of forced closures wiped out approximately $567 million in long positions and $69 million in short positions, producing an aggregate liquidation figure near $640 million and pushing Bitcoin below $87,000 in the acute phase. Volatility measures on both equity and crypto venues spiked in tandem with JGB yields, reflecting a synchronized risk‑off impulse rather than isolated crypto market stress.
Market mechanics and risk implications
Liquidation mechanics in crypto — automatic margin closeouts when collateral falls below thresholds — can sharply amplify price moves when liquidity is thin. The event highlighted two structural vulnerabilities: heavy reliance on cross‑currency funding and concentrated long positions in leveraged venues. For liquidity providers and treasury desks, the episode underlined the importance of stress testing funding cost shifts and slippage assumptions under rapid sovereign yield re‑pricing.
‘Changes’, as one economics author put it, summarises the recalibration: when sovereign yields reprice materially, cross‑asset and cross‑currency funding dynamics change first, and leveraged risk positions are the most exposed. Institutional actors should reassess counterparty exposure in perpetuals, the resilience of liquidation ladders, and margining models that assume persistent cheap external funding.
The episode marks a tangible example of how sovereign bond repricing can transmit to crypto markets via funding channels and forced liquidations, tightening global liquidity and repricing risk. For traders and institutional treasuries, it stresses the need for scenario analysis that incorporates sovereign yield shocks and rapid funding cost reversals. Next verified milestone: the Bank of Japan’s December 2025 policy decision and subsequent JGB auction results, which will clarify whether the repricing stabilizes or evolves into a broader global liquidity adjustment.