Bitcoin may suffer additional downside pressure as investors closely follow the Bank of Japan’s policy meeting on December 19. A number of analysts caution that Bitcoin may continue its current decline towards the $70,000 mark if the Bank of Japan (BoJ) proceeds with a rate hike.
According to market analysts, the issue is not unique to Japan. A hike in the BoJ rate may result in less global liquidity, which frequently affects riskier assets like cryptocurrencies.
Bitcoin is the market leader, with a market capitalisation of $1.79 trillion and a daily trading volume of $31.34 billion. Long-term scarcity is supported by the fact that its circulating supply is almost at the maximum limit.
Healthy but cautious trading interest is indicated by the volume-to-market-cap ratio of 0.0228. At a record high of $126,272, investors are still keeping an eye on how macro events will influence the next significant move.
In the past, when major central banks tighten monetary policy, Bitcoin has exhibited weakness.
Japan’s long history of low interest rates makes it a major player in international markets. To engage in riskier assets like stocks and cryptocurrency, many traders take out low-cost Japanese yen loans.
This approach, known as the yen carry trade, aids in the movement of funds into global markets during times of easy monetary conditions.
The cost of borrowing yen increases if the BoJ hikes interest rates. Consequently, traders might unwind these carry transactions, which would result in lesser market liquidity and less leverage.
According to analysts, when investors withdraw from risky assets during such “risk-off” periods, Bitcoin frequently experiences the effects first.
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