Crypto Majors Rise as Global Funds Cut Dollar Hedges to Decade Low
Institutional investors from Japan to Denmark have cut dollar hedging to the lowest since 2015, boosting Bitcoin and Ethereum. The shift amplifies risk-asset sensitivity to currency moves.
Bitcoin and Ethereum are gaining as institutional investors from Japan to Denmark reduce dollar hedging to the lowest levels in at least a decade, a shift that is amplifying support for risk assets.
According to data from the Bank for International Settlements and national central banks, hedge ratios for dollar exposure among non-US institutional holders dropped to 41% of foreign-currency exposure in late June, the lowest reading since 2015. The decline in hedging has coincided with a softer dollar, benefiting crypto prices.
Japanese investors hedged only 41% of new foreign bond purchases in the first half of 2026, down from 62% in 2024. Danish pension funds reversed roughly half of their mid-2025 hedging increases by early 2026. Canadian institutions saw hedge ratios slip by about one percentage point. Similar trends appeared in Taiwan and the Netherlands.
The cost of hedging has fallen sharply. Three-month dollar hedge costs for yen-based investors fell to a four-year low of 2.75%. Euro-based hedging costs dropped to a two-year low of 1.32%. Narrowing interest rate differentials between the US and other major economies compressed those costs.
When institutional investors reduce dollar hedges, they increase their portfolio's sensitivity to currency movements. A weaker dollar translates more directly into higher returns on foreign assets, improving risk sentiment broadly. Lower hedge ratios mean that dollar weakness makes dollar-denominated assets cheaper for foreign buyers and increases global liquidity conditions.
With hedge ratios at decade lows, the amplification effect could be stronger than usual. Portfolios less shielded from currency fluctuations will experience more dramatic valuation swings based on where the dollar goes next.
The cumulative effect of these strategic unwinds has left global portfolios more exposed to dollar volatility than at any point in the past decade. If the dollar surges, institutions with minimal hedges would face outsized losses on their foreign holdings, potentially creating selling pressure across asset classes.
Market commentary has flagged this asymmetry, suggesting that risk assets may respond more dramatically to currency swings than in previous years. The January 2026 experience offered a preview, when dollar declines provided strong support to crypto prices.
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