Key Takeaways:
- Bitcoin experienced a modest increase in trading activity during the Asian session.
- This increase occurred alongside a notable decline in Japan’s Nikkei index, which fell by over 2%.
- Reuters reported on the possibility of a significant policy shift at the Bank of Japan, known for its historically low-interest rate policies.
Bitcoin (BTC) saw a slight increase in trading activity early on Monday amidst talks of a potential shift in policy at the Bank of Japan (BOJ), which could mark the end of its era of ultra-low interest rates. At the time of writing, BTC was trading at $69,000, reflecting a 1% increase over the past 24 hours. Despite briefly dipping to $67,120 earlier in the day, BTC had recently reached a new record high above $70,000 on Friday. However, the broader cryptocurrency market, as measured by the CoinDesk 20 Index, experienced a decline of 2.17%.
The Asian equity markets reacted to the news, with Japan’s Nikkei and Australia’s ASX falling by 2% following a Reuters report suggesting that the BOJ might raise the benchmark interest rate above zero during its March 18-19 meeting. Speculation has been growing that the BOJ could make this move, which would be its first rate hike since 2007. Additionally, the report indicated that the BOJ might consider discontinuing its bond-buying program after ending its negative interest rate policy.
Market analysts have long viewed the BOJ as a significant source of uncertainty for both traditional and cryptocurrency markets. Since 2016, the BOJ’s negative interest rate policy (NIRP) and bond-buying program have exerted downward pressure on global government bond yields, supporting asset prices. However, the bank is now facing pressure to raise rates due to higher domestic inflation and the likelihood of wage increases. The strengthening Japanese yen, which has seen a 2% weekly gain against the US dollar, adds to the urgency for the BOJ to act.
The potential shift in the BOJ’s policy stance and the resulting strength in the yen could undermine the yen carry trade, which has contributed to the ongoing risk-on rally in financial markets, including technology stocks and cryptocurrencies. Investors in the crypto market are closely monitoring the situation, particularly the impact on technology stocks, as previous bull runs in bitcoin have coincided with the outperformance of rate-sensitive technology stocks relative to the broader equity market.
Despite the short-term uncertainty, the consensus among crypto market participants is that any downturn in bitcoin prices is likely to be temporary, with expectations of prices rallying to six figures in the coming months.
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