The Nikkei 225, Japan’s stock market benchmark, rallied for a second day on Wednesday, surging past the 35,000 mark after comments from Bank of Japan Deputy Governor Shinichi Uchida. Uchida’s statement indicating a possible pause in future rate hikes if global market instability worsens, provided a much-needed boost for riskier assets like equities and cryptocurrencies.
This comes after a tumultuous week that saw the Yen’s value skyrocket following the Bank of Japan’s initial rate hike announcement. The Yen’s appreciation triggered a major unwinding of the Yen carry trade, a popular investment strategy involving borrowing Yen at low-interest rates and investing in higher-yielding assets. This unwind, coupled with recession fears in the US and concerns about inflated tech stock valuations, resulted in a $6.5 trillion rout in global equity markets earlier this week.
However, with the Nikkei’s rebound and the Bitcoin price climbing back above $57,000, there’s a cautious sense of optimism emerging. Analysts believe the worst market turmoil might be over. CryptoQuant CEO Ki Young Ju suggests that as long as Bitcoin stays above $45,000, the bull market remains intact. Ju, according to CNF update, predicts Bitcoin could even reach new all-time highs within a year.
While some technical indicators still show bearish signals, a sustained price recovery for Bitcoin could lead to a correction of these indicators. The next few weeks will be crucial in determining the market’s direction.
Central Bank Pivot Raises Concerns
Despite the recent positive signs, not everyone is convinced. Renowned economist Peter Schiff criticized the Bank of Japan’s decision to potentially pause rate hikes. He argues that the central bank should prioritize controlling market turmoil, which he believes cannot be achieved without raising rates. Schiff warns that a pivot by the BOJ could exacerbate inflation, ultimately forcing them to aggressively hike rates later, causing a market crash.
Japan Considers Crypto ETFs
In another interesting development, Japan’s top financial regulator, the Financial Services Agency (FSA), is reportedly considering allowing cryptocurrency exchange-traded funds (ETFs). This comes despite reservations from FSA commissioner Hideki Ito, who questions the contribution of crypto-assets to Japan’s long-term wealth creation.
Also Read: Bitcoin (BTC) Death Cross May Be False Alarm as BOJ U-Turn Buoys Market
Meanwhile, Japanese investment firm Metaplanet continues to show confidence in Bitcoin, raising an additional $70 million to add to their holdings, according to a CNF report.
Will The Rally Continue?
The Bank of Japan’s stance on future rate hikes and the overall health of the global markets will be key factors influencing the Nikkei and Bitcoin’s price movements in the coming days. While analysts are cautiously optimistic, the next few weeks will be crucial in determining if the current rally can be sustained.
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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