Crypto14 April, 20262 min read
Bank Of Japan Eases Rate Hike Expectations Boosting Bitcoin Rally
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BoJ signaled unlikely to raise rates at April meeting, easing macro pressures. Bitcoin rose past $74,000 amid dovish BoJ stance and carry-trade appeal.
BOJ Dovish Shift
Bitcoin's surge past $74,000 was helped by the Bank of Japan's signal that it is unlikely to raise interest rates at its April 28 meeting. The BOJ's dovish shift keeps the yen carry trade alive, the same trade whose unwind crashed bitcoin 24% in two days in August 2024. Japan's 20-year bond auction drew its strongest demand since 2019, with a bid-to-cover ratio of 4.82.
A weak yen keeps carry trade funding cheap, supporting leveraged positions across risk assets including bitcoin. Data from last week showed $2.1 billion in new bitcoin open interest and $2.2 billion in ether open interest in 24 hours. Japan is among the economies most exposed to the Strait of Hormuz, through which more than 90% of its oil imports flow.
Carry Trade and Crypto
The yen carry trade had become one of the largest sources of leveraged risk-asset exposure globally. A yen unwind tends to cause quick sell-offs in risk assets, with bitcoin and major cryptocurrencies the first to be hit. Ueda just signaled that trade stays intact for at least another month.
The $73,000 ceiling held for six weeks partly because macro headwinds gave leveraged traders no reason to push through it. The carry trade's persistence is a key factor behind bitcoin's breakout.
BOJ Rate Hike Looms
The Bank of Japan is poised to raise its policy rate by 25 basis points to 0.75%. Past hikes in Japanese rates have triggered sizable declines in Bitcoin, from about -23% to -30%.
This phenomenon is explained by the weakening of the yen carry trade. If the BoJ tightens monetary policy, investors could be forced to liquidate their positions in risky assets.
Market Divergence
Not all observers share the same alarmist interpretation. Quantum Ascend adopts a less pessimistic reading.
If the United States injects more dollars while Japan tightens slightly, the net balance could still favor crypto investment. Bitcoin has remained relatively stable for weeks, moving in a consolidation phase.
Post-Hike Market Reaction
The Bank of Japan raised interest rates to 0.75%. The cryptocurrency market did not react harshly. Bitcoin has risen to $88,176.99, while Ether is at $2,976.43.
The BOJ decision was unanimous. The 10-year government bond yields pushed above 2% for the first time since 2006.
