Hawkish Policy Fears in Japan Spark Bitcoin Sell-Off as Markets React
At least half of the losses in Bitcoin occurred on Monday during European trading hours, when the cryptocurrency lost 3.5%. Predicting that Shigeru Ishiba, a monetary policy hawk, would win the campaign to become Japan’s prime minister, market experts blamed him for the entire decline, citing early morning losses in the equity of that country.
Major regional equities market indices are frequently used as examples by BTC. The story that hawkish Ishiba prioritized risk assets, including Bitcoin, was called into question on Monday, as the Japanese currency declined overall, except for a little early morning bid. On the other hand, the AUD/JPY cross, which analysts view as a risk barometer, increased by 1.15% on Monday, providing good signals to bitcoin and other riskier assets. The USD/JPY pair increased by 1%.
Bitcoin Tumbles as Traders Look Beyond Japan’s Politics: Yen Emerges as Key
It is evident that markets are not concerned about Ishiba’s alleged support for monetary tightening and the possibility of quicker rate increases by the Bank of Japan (BOJ) at this time. Late in July, the central bank increased interest rates, which led to a widespread unwinding of risk-on bets financed by low-cost loans denominated in Japanese yen. In a matter of days, BTC decreased from approximately $65,000 to $50,000 back then.
It seems that Monday’s events involved more factors than only the influence of Ishiba and Nikkei. Perhaps BTC was simply overbought and due for a good old bull market retracement following a near 90-degree climb from lows under $53,000. However, Amundi Investment Solutions says that the yen, not the Nikkei, should be watched since it is a US recession trade.
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