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XRP Outperforms Crypto Majors as Japan Yen Strength Signals Bitcoin Trouble
Yen breached the key 150 level against dollars early Friday, a move that has previously catalyzed the unwinding of carry trades.
Updated Nov 29, 2024, 5:31 a.m. Published Nov 29, 2024, 5:11 a.m.
What to know:
- XRP tokens surged more than 5% in the past 24 hours to drive gains among majors in the past 24 hours.
- The crypto market’s moves in Asian hours came as the Japanese yen broke a key level against U.S. dollars.
- Yen is colloquially known as an "anti-risk" currency and is seen as a safe-haven currency that investors turn to during times of stress.
XRP rose over 5% in the past 24 hours to drive gains among majors in the past 24 hours as a Thanksgiving holiday saw bitcoin avoid a feared historical “massacre,” with a slight uptick across the market.
BTC was changing hands above $96,000 in the early hours Friday, a steady rise from Thursday’s lows of $93,500. Ether , Solana’s SOL, and BNB were little changed, while Cardano’s ADA was 3.5% higher, and lost 1.2%.
The broad-based CoinDesk 20 (CD20), a liquid fund tracking major tokens, added 1.3%. Algorand’s ALGO and Worldcoin’s WLD jumped as much as 21% to lead gains among midcaps amidst no immediate catalysts.
The crypto market’s moves in Asian hours came as the Japanese yen broke a key level against U.S. dollars.
The yen briefly crossed 150 against the dollar due to expectations of a Bank of Japan (BOJ) rate increase in December, spurred by higher-than-expected Tokyo inflation data. The movement was likely accentuated by month-end financial adjustments and low liquidity due to Thanksgiving.
Market sentiment leans towards a 63% chance of a BOJ rate hike, contrasting with a 67% likelihood of a Fed rate cut, which could reduce the attractiveness of yen carry trades. Yen is colloquially known as an "anti-risk" currency and is seen as a safe-haven currency that investors turn to during times of stress.
Yen's outperformance at the end of July and September has previously catalyzed the unwinding of carry trades, or bullish risk-on bets, financed by relatively cheap yen-denominated loans as it became more expensive to borrow the Japanese currency.
A CoinDesk analysis earlier this week signaled bitcoin's bullish run has weakened, with the Aussie dollar/Yen exchange rate dropping, signaling a risk-off mood. The AUD, linked to global economic health, and the yen tend to affect risk assets like BTC inversely.
This scenario echoes an earlier period when a yen surge due to BOJ rate hike rumors led to an 8% drop in AUD/JPY and a $20,000 fall in BTC, showing the potential impact of FX movements on cryptocurrencies.
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Japan’s Higher Rates Puts Bitcoin in the Crosshairs of a Yen Carry Unwind
A stronger yen typically coincides with de-risking across macro portfolios, and that dynamic could tighten liquidity conditions that recently helped bitcoin rebound from November’s lows.
What to know:
- The Bank of Japan is expected to raise interest rates to 0.75% at its December meeting, the highest since 1995, affecting global markets including cryptocurrencies.
- A stronger yen could lead to de-risking in macro portfolios, impacting liquidity conditions that have supported bitcoin's recent recovery.
- Governor Kazuo Ueda indicated a high probability of a rate hike, with officials prepared for further tightening if their economic outlook supports it.
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