HONG KONG — Market participants at the Hong Kong Consensus 2026 conference said last week’s sharp sell-off in cryptocurrencies was less a repeat of the 2022 scandal and more a relaxation of traditional financial macro drivers.
“After October 10, many people have reduced their risk,” said Fabio Frontini, founder of Abraxas Capital Management. “It’s a complete spillover from TradFi…Everything is interconnected now.”
Panelists pointed to the unwinding of yen carry trades as a key catalyst. Thomas Restout, CEO of B2C2 Group, described the mechanism: Investors borrow in low-interest-rate currencies such as the Japanese yen and allocate funds into high-yielding or risky assets, including Bitcoin, Ethereum, gold and silver.
“What does this mean? It means that people borrow money with cheap interest rates and then use it to carry out carry trades,” Restot said.
The yen carry trade involves investors borrowing yen at low interest rates, converting it into other currencies, and then investing in higher-yielding assets. However, if the yen strengthens, investors must buy back the yen to repay the loan, causing trades to “unwind” and triggering market volatility.
As yen interest rates rise, borrowing costs increase. At the same time, higher volatility triggers higher margin requirements. Restout added: “Margin requirements for metals increased from 11% to 16%.” This forced some players to liquidate their positions as demand for collateral surged.
The result is pressure on risk assets broadly, not just cryptocurrencies.
Although panelists resisted the idea of wholesale institutional capitulation, exchange-traded funds (ETFs) tracking Bitcoin have also seen significant volume during the downturn. At its peak, Bitcoin ETFs held about $150 billion in assets; Restot said they still hold about $100 billion today. Net outflows since October are about $12 billion, which, while large, is modest relative to total assets.
“If anything, money is changing hands,” said Restot, who suggested rotating exits rather than large-scale exits.
Looking ahead, Emma Lovett, head of credit for markets distributed ledger technology at JPMorgan, said 2025 marks a regulatory inflection point. The more permissive U.S. context has accelerated experiments from private, permissioned blockchains to public chains and stablecoin settlements.
“In 2025 we start to see…the introduction of the use of public blockchains and…stablecoins to settle traditional securities,” she said. This signals a deeper integration of TradFi and crypto infrastructure in 2026.