On Tuesday, the governor of the Bank of Japan declared that ought to the economy and price show expected performance, the central bank would boost the important thing rates of interest even further. Rising around 146 against the US dollar, the Japanese yen recovered from a two-week slump under a hawkish view on the BOJ’s monetary policy.
This hawkish move by the BOJ, and its governor Kazuo Ueda, has led to a strengthening of the Japanese yen (JPY) against other major currencies, including the greenback. The USD/JPY exchange rate has retreated to just about 150, marking the yen’s strongest position since March.
The appreciation of the yen as a “anti-risk” currency has had knock-on effects on world markets, contributing to tighter financial conditions and better risk aversion amongst investors.
Bitcoin: Correlation With Traditional Assets
Bitcoin has shown increasing correlation with traditional risk assets, comparable to stocks. The recent surge within the yen has led investors to unwind positions that utilized the low-yielding yen for purchasing higher-yielding currencies, generally known as carry trades. This has put pressure on Bitcoin, in addition to other risk-on assets like technology stocks.
Long-Term Consequences And Short-Term Volatility
Following the BOJ rate increase and tightening policies, Bitcoin’s price behavior within the immediate term will most actually be erratic. The strong dovish signal from the US Federal Reserve at their upcoming meeting will drive the yen higher and hence raise the bar of risk aversion in markets.
Long run, if BOJ activities keep succeeding in improving the investment environment and increasing liquidity, then Bitcoin will follow its positive trend as more investors select alternative assets.
Globally from a financial perspective, investor mood, and Bitcoin’s relationship with conventional assets might be an important aspects influencing the worth movement for the cryptocurrency.
Fights Against Recession: Bitcoin Performance
The approaching recession was indeed a divisive issue regarding how it will affect the worth of Bitcoin. Some said that investors might swarm to the cryptocurrency for canopy due of its being some form of digital store of value and others believed that when things get dicey economically people normally pull money out from highly speculative investments and put that cash wherever they felt safest.
While some extent of short-term volatility is tough to avoid, the long-term fortunes of Bitcoin do rely on a wide range of aspects–investor sentiment, global economic prospects, and the behavior of traditional assets. The more mature Bitcoin gets via widespread adoption, the more critical it could develop into as a hedge to economic uncertainty.
Featured image from FXEmpire, chart from TradingView