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Crypto Bulls Brace for Bank of Japan's Rate Hike That Could Derail Momentum
Japan's headline inflation is at 2.9% year-over-year, at a 3-month high. A hot inflation print could set bitcoin back.
Jan 16, 2025, 2:10 p.m.
What to know:
- The market is currently pricing a 90% rate hike from the Bank of Japan for the meeting on Jan. 24.
- Japan’s headline inflation year-over-year is at 2.9%, with an inflation print the day before the interest rate decision.
- The Japanese Yen is at 156 against the U.S. dollar, the strongest in a month.
Most investors have their eyes set on President Trump's inauguration on Jan. 20, which has the potential to be a key catalyst for bitcoin and cryptocurrency prices.
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However, a few days later, there is a potential rate hike on the cards from the Bank of Japan (BoJ). According to a Bloomberg chart shared by analyst Michael Kramer on X, the market is currently factoring in a 90% chance of a rate hike on Jan. 24.
Previously, the BoJ rate hike caused havoc on both the traditional and digital assets market . This was a key catalyst for the Yen carry trade unwind at the start of August, which sent bitcoin tumbling to $49,000. Traders are likely bracing for another selloff this time around.
Since 2016, the BoJ has maintained negative interest rates; however, in 2024, they increased interest rates twice, from -0.1% to 0.25%. The implied rate going into the meeting is 0.45%; however, this could drastically change as Japan has an inflation report just the day before, on Jan. 23.
Headline inflation year-over-year is at 2.9%, the highest since August. A hotter-than-expected inflation print could create fears within the market, and another iteration of the Yen carry trade unwind could be on course.
Even with the remarkable strength of the DXY index, which is currently above 109, the highest level since November 2022, it has jumped from 100 from the September low.
The DXY index is following a similar trajectory to Donald Trump’s first presidential term, which saw a rally in the DXY leading into his inauguration and then fell considerably, giving risk assets a much-needed boost. The DXY index measures the value of the U.S. dollar against a basket of major foreign currencies.
The Japanese Yen is at its strongest level against the dollar since Dec. 16, at 156.
Read more: Bank of Japan Governor Hints at More Rate Hikes; BTC Drops 0.4%
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