Bitcoin, which started the week fast, made the most remarkable jump of the last period by exceeding $ 74,000. This rise was influenced by Bank of Japan Governor Kazuo Ueda’s softening of expectations for a new interest rate increase. Ueda pointed out that they are not planning a hasty step towards increasing interest rates before the monetary policy meeting at the end of April.
Japan’s interest rate steps directly affect the crypto market
It is known that Japan’s monetary policy decisions have had a direct impact on crypto assets in the past. In particular, the surprise interest rate increase last August paved the way for sharp movements in the crypto market, and the Bitcoin price dropped from $ 64,000 to $ 49,000 in two days.
The basis of this sharp fluctuation is the so-called “carry trade”, in which investors turn to high-yield assets by borrowing at low cost in yen. This mechanism is considered one of the main sources of financing for leveraged positions in Bitcoin and other cryptocurrencies. Sudden interest rate increases can lead to rapid liquidation of these positions, causing sharp declines in prices.
However, with the messages received this week, expectations that the low interest rate environment in Japan will continue have strengthened. The 20-year government bond auction held on Tuesday saw the highest demand in the last five years. The fact that the demand rate conveyed at the closing was 4.82 showed that the players in the market agreed that interest rate increases are not on the agenda for now.
Weak yen brings new buying wave to crypto
With the postponement of the interest rate increase, the Japanese yen remains at around 160 against the dollar, which keeps the financing cost low. Low-cost borrowing continues to support leveraged transactions in risky assets. It was noted that the recent rise in Bitcoin price, especially in the futures market, accelerated again at this stage.
Data published last week showed that there was an open position increase of $2.1 billion in Bitcoin futures and $2.2 billion in Ether futures contracts in one day. It is considered that the net new purchases seen in open positions may have been supported directly or indirectly by the liquidity provided by the Bank of Japan.
Japan’s economic balances are highly dependent on oil imports. More than 90% of the country’s total oil needs are met through the Strait of Hormuz. The impact of the risk of a possible new geopolitical tension in the Middle East on the Japanese economy is being closely monitored.
If there is a positive result from the negotiations between the USA and Iran and oil prices continue to decline, inflation pressure in Japan will decrease. This will make it even more difficult for the Bank of Japan to find a new justification for increasing interest rates. As long as the risks carried remain low, the carry trade mechanism and low interest rate environment will keep the interest especially in Bitcoin and other risky assets high.
It is said that the latest statement made by the Governor of the Bank of Japan, Kazuo Ueda, that they will not be in a hurry to increase interest rates, supports the positive atmosphere in crypto assets.
Bitcoin, which has been moving horizontally around $73,000 for the last six weeks, has seen a fresh wave of purchases with these macroeconomic developments.
Global financial balances and central banks’ policies continue to significantly determine the direction of cryptocurrency markets.
