"XRP ( ), more sensitive to these flows than Bitcoin or Ethereum, fell sharply as leveraged positions unwound. With economists projecting rates could hit 1.0% by September 2026, the macro pressure looks set to persist. Each incremental hike tightens the funding conditions that made crypto speculation cheap. But Japan simultaneously approved crypto tax reform that could override the entire carry trade narrative-slashing rates from 55% to a flat 20% and opening institutional floodgates."
"For years, the yen-funded carry trade quietly pumped liquidity into risk assets without most investors noticing the mechanism. Traders borrowed yen at near-zero rates and deployed the capital into higher-yielding markets-including crypto. When Japanese rates sat at -0.1%, the trade was autopilot profitable. Borrow for free, earn anywhere else, pocket the spread. XRP benefited more than most from that constant flow."
A December 25-basis-point BOJ hike to 0.75% pushed 10-year JGB yields above 2%, immediately pressuring yen-funded carry trades that financed crypto liquidity. XRP experienced a sharper decline than Bitcoin or Ethereum as leveraged positions unwound because of its smaller market depth and higher speculative positioning. Economists expect rates near 1.0% by mid-2026, which would further tighten cheap funding for crypto speculation. Simultaneously, Japan approved crypto tax reform cutting rates from 55% to a flat 20%, potentially unleashing institutional demand. The interplay between carry-trade unwind and tax-driven structural demand will determine whether XRP stalls around $2–$3 or breaks into $4–$5.
Read at 24/7 Wall St.
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