In August 2024, a significant sell-off in crypto markets occurred, triggered by Japan's fiscal crisis which led to a global liquidity shock. Bitcoin fell nearly 17% from its peak, while other cryptocurrencies like Ether, Solana, and Polkadot also suffered substantial losses. This situation was spurred by a lack of confidence in Japan's sovereign debt market, where institutions began liquidating overseas assets, affecting global liquidity and leading to increased bond yields. Japan’s fiscal troubles stemmed from decades of deficits and demographic challenges, resulting in a debt-to-GDP ratio above 260%. The Bank of Japan's modifications to its yield curve control policy signaled a shift that frightened investors. These events precipitated a crisis of confidence in traditional fiat systems, as Japanese financial institutions unwound their global positions, further straining liquidity. Despite this turmoil, long-term investor interest in Bitcoin remained strong, indicating a growing view of crypto as a hedge against traditional financial instability. The incident highlighted how interwoven crypto markets are with global finance, raising questions about cryptocurrencies' role in future monetary systems.

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