The Bank of Japan announced the start of unwinding its ETF holdings, a decision that triggered significant stock sales and a notable drop in cryptocurrencies. The move affects local liquidity and global risk appetite, impacting institutional and retail investors exposed to equities and digital assets. Although the bank maintains that the process will be deliberate to minimize disruptions, its scale and timing introduce immediate market uncertainty.
Context and Impact
The ETF “unwind” involves the orderly sale of holdings that a centralized entity maintains in exchange-traded funds, aiming to reduce exposure without sharply impacting prices.
The Bank of Japan plans to reduce its position through open market operations. Governor Ueda noted that the process “could extend beyond a century” at the current pace, emphasizing gradualism. Annual sales are estimated at ¥330 billion (book value), which would take over a century to fully unwind the position if maintained at this rate.
Goldman Sachs analysts anticipate a possible acceleration between 2026 and 2027, with annual sales of ¥600 billion to ¥1 trillion, to reduce exposure more quickly. This reconfiguration coincides with regulatory changes in the U.S., where delays and reviews of crypto ETFs by the SEC have heightened volatility. The Bank of Japan’s announcement coincided with profit-taking in equities and declines in cryptocurrencies such as ETH, affected by postponed Ethereum ETF decisions.
Market Implications
Potential effects include:
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Higher volatility in Bitcoin (BTC) due to liquidity shifts and risk.
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Headwinds for Ethereum (ETH) from regulatory delays on ETFs.
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DeFi projects and NFTs face increased risk from regulatory scrutiny and reduced liquidity.
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Altcoins like Solana (SOL) and XRP could benefit if ETF approvals occur, with estimated inflows for XRP of $4.3–$8.4 billion and price targets for SOL of $275–$475 by 2028.
Key Points to Watch
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Current pace: ¥330 billion/year (book value).
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Alternative scenario: start of accelerated sales 2026–2027 per Goldman Sachs.
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Critical variable: SEC decisions on crypto ETFs.
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Main risk: increased volatility and reduced liquidity.
The next milestone will be the possible acceleration of sales in 2026–2027 and pending SEC decisions on crypto ETFs, which will determine the extent of the impact on equities and digital markets.
