It didn’t take much to trigger a new bout of fear and heavy selling in cryptocurrency markets; just a comment from the Bank of Japan’s governor suggesting Japanese interest rates might be raised soon.

Bitcoin’s price dropped almost 5 per cent – it was down about 8 per cent at one point on Monday – and the overall market for crypto assets lost the best part of $US200 billion ($305 billion) after *Kazuo Ueda’s comments.

Trump has embraced the crypto industry in his second term. Credit: AP

Only a month ago Bitcoin was valued at $US110,000. It’s now trading around $US86,000, a long way off – more than 30 per cent off – its peak of more than $US126,000 two months ago. The market value of all traded crypto assets was above $US4.2 trillion mid-year. It’s now $US2.9 trillion.

Donald Trump’s on-again, off-again tariffs, a weakening US economy, and volatility and uncertainty in bond markets have been significant influences on the market’s volatility this year, puncturing the enthusiasm with which investors responded to the Trump’s administration’s ushering of cryptocurrencies into the mainstream of US finance with the passage of the Genius Act in July.

Ueda’s signal that Japan might soon raise interest rates shouldn’t have surprised the market, given it’s been a topic of significant discussion in recent weeks as the Japanese inflation rate has kept rising.

Indeed, Japan’s bond market has already moved, with the yield on two-year bonds breaking through one per cent for the first time since 2008 and the yield on 10-year bonds rising to 1.87 per cent, again the highest since mid-2008.

The spike in Japanese yields is significant for the crypto market because there’s been a big “carry trade” that has seen cheap funds raised in the Japanese market being used in leveraged crypto trades. According to Bloomberg, nearly $US1 billion of those leveraged positions were liquidated on........

© The Sydney Morning Herald