Bitcoin’s price movements have often been a reflection of global economic events, with many eyes turning to Japan in August 2024 when the Bank of Japan (BoJ) raised interest rates for the second time in 17 years. This decision stoked fears of a potential market crash, as it was tied to the unwinding of the yen carry trade—a long-standing strategy where investors borrowed cheap yen to invest in higher-yielding assets abroad.
The August 2024 rate hike caused an immediate 14% drop in Bitcoin’s value, while altcoins faced even steeper losses. The crypto market was shaken, and many feared further rate hikes would trigger another wave of panic. Fast forward to January 2025, and the BoJ’s most recent hike—raising rates by 25 basis points to 50 bps—was expected to have a similar impact. However, much to the surprise of analysts, Bitcoin and the broader crypto market have shown remarkable resilience.
As of January 25, Bitcoin has seen a 2.4% uptick, trading around $105,000. Ethereum, XRP, and Solana also posted solid gains, with increases of 5.5%, 1.4%, and 5.5%, respectively. The market reaction raises the question: Why hasn’t the rate hike led to panic this time?
Experts, including market analyst Amit Kukreja, suggest that the market had already priced in the BoJ’s rate hike. Investors who had feared a larger correction following the initial rate hike in August may have already adjusted their positions, minimizing the impact of subsequent hikes.
THE BANK OF JAPAN RAISES RATES BY 0.25%, NOW TO THE HIGHEST LEVEL IN 17 YEARS.
— amit (@amitisinvesting) January 24, 2025
The last time this happened in August of 2024, we had the Yen-Carry trade which spiked the $VIX up 600% in a day and caused equities to fall from 20-30%.
The reason for this was because traders were… pic.twitter.com/qs7kAY71uS
In the wake of Japan’s actions, attention now shifts to the upcoming U.S. Federal Open Market Committee (FOMC) meeting. Many in the crypto market are hoping the Federal Reserve will adopt a more dovish stance, particularly as recent core inflation data from December 2024 points to cooling inflation.
Also Read: Bitcoin Price Surge: Experts Predict a $150K Milestone by 2025
In conclusion, Bitcoin’s ability to stay relatively unaffected by the BoJ’s hawkish stance underscores its growing maturity in navigating global financial shifts, signaling confidence among investors even amid uncertain times.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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