The three risks that could overwhelm bitcoin’s regulatory tailwind

This is an excerpt from CoinDesk newsletter ‘Daybook.’ Sign up here, if you haven’t already.

The crypto market is caught between a promising regulatory moment and a deteriorating macro backdrop. The Clarity Act cleared the Senate Banking Committee last week, offering the industry its clearest path yet to a comprehensive U.S. regulatory framework.

But shenanigans in traditional markets, mainly volatility in Treasury notes, swings in the dollar-yen exchange rate and the price of oil, are pointing in the other direction.

For a start, U.S. Treasury yields are not just rising, but looking volatile. The ICE BofA MOVE index, which measures volatility in Treasuries, jumped 14.7% to 79.87 on Friday, its highest level since April 7 and its biggest single-day increase since March 26, according to TradingView data. Treasury notes underpin global finance and serve as the primary collateral in lending markets worldwide. When they swing sharply, it discourages risk-taking and triggers broad-based selling across asset classes.

A second risk is the yen. The Japanese currency has weakened from 155 per dollar to nearly 159 per dollar in recent days, nearing the 160 level that has historically prompted the Bank of Japan (BOJ) to take action to stall the slide. A potential BOJ intervention would strengthen the yen, forcing an unwind of risk-on carry trades funded by yen borrowing.

“USD/JPY at 158 to 159 is edging toward the psychologically important 160 level, where intervention risk increases and crowded yen-carry positions could begin to unwind sharply, potentially draining a key source of global liquidity that has been supportive of risk assets,” Singapore-based QCP Capital said in a daily note.

Then there’s oil. WTI and Brent crude are both firmly above $100 and could push higher still. The International Energy Agency’s head, Fatih Birol, warned Monday that commercial oil inventories are depleting rapidly owing to the Iran conflict and closure of the Strait of Hormuz, with remaining stockpiles potentially lasting only weeks. A price rally would stoke inflation, tighten financial conditions further, and could trigger broad deleveraging across global markets, crypto included.

Together, these three risks are a reminder that macro forces can overwhelm even the most positive regulatory catalysts. Right now, macro is winning.

Stay alert!