Another day of decline in global stock markets, and cryptocurrencies continue to lead this global correction, with Bitcoin falling another 10% today to US$82,000.

Many people have attributed this recent market correction to reduced global liquidity.

In Japan 🇯🇵, the 30-year bond yield hit 3.4% yesterday. Why does this matter? Because Japan has a debt-to-GDP ratio of over 250%, and its zero-interest rate policy is coming to an end. For many years, the Yen has been the main currency for "carry trade," selling the currency to invest in other currencies and assets worldwide that pay higher returns.

Furthermore, we have seen some signs of stress in the American interbank market, and the Fed's current account (TGA) has risen again to US$1 trillion – from US$300 billion in July – which effectively leads to reduced liquidity in the markets.

However, despite being true, the curious thing about this argument is: 1) interest rates in Japan didn't start rising now, it's not necessarily something "new," and most importantly: 2) the global currency market is still quite calm, very different from Japan's "volmageddon" in August 2024.

It's worth closely monitoring the coming days/weeks. As I've said, the markets are in "correction" mode, so it's advisable to proceed with caution.