Global markets have swung back into risk-off mode over the past week, rattled by a sharp repricing in Japanese bonds and renewed trade tensions between the United States and Europe. The shift has pressured equities, bonds, and crypto alike, with investors moving toward capital preservation rather than risk-taking.

Japan has emerged as a key source of volatility. After decades of near-zero interest rates, yields on 10-year Japanese government bonds have climbed to around 2.29%, their highest level since 1999. The move is forcing investors to confront the country’s fragile fiscal position.

As yields rise, concerns over debt sustainability are spilling into global bond markets, underscoring Japan’s outsized influence on cross-asset volatility. At the same time, geopolitical tensions are flaring across the Atlantic.

President Donald Trump has announced 10% tariffs on goods from eight European countries that opposed U.S. control of Greenland. The measures are scheduled to take effect on February 1 and rise to 25% by June 1. European officials have signaled swift retaliation, raising the risk of a deeper trade confrontation.

The stakes are significant. According to QCP’s Jan. 21 market update, U.S.–EU goods trade was valued at roughly $650 billion to $700 billion in 2024, and the European Parliament is now weighing whether to suspend approval of a trade deal reached last July, which could further strain transatlantic relations and impact markets.

Read more: Bitcoin Below $90,000: Technicals Flash ‘Strong Sell’ as Geopolitical Fears Erase Monthly Gains

Against this backdrop, bitcoin has struggled to regain momentum. After briefly reclaiming $97,000, the asset has slipped back below $90,000, currently trading at $88,000, as risk appetite fades.

Rather than acting as a hedge, bitcoin has shown sensitivity to rising rates and geopolitical headlines. With liquidity tightening and policy uncertainty lingering, crypto markets appear set to remain reactive in the near term.

• Why are markets shifting into a risk-off stance?
Rising Japanese bond yields and escalating U.S.–Europe trade tensions are driving investors toward safer assets.
• How are Japanese bond yields affecting global markets?
Surging JGB yields are raising debt-sustainability fears in Japan and spilling volatility into global bonds and risk assets.
• What role do U.S.–EU trade tensions play in this selloff?
New U.S. tariffs on European goods and threats of retaliation have increased geopolitical and macro uncertainty.
• Why has Bitcoin fallen below $90,000?
Bitcoin is trading like a high-beta risk asset, retreating alongside equities as rates rise and macro risks mount.

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