As the crypto market eagerly awaits the inauguration of US President-elect Donald Trump on January 20, another significant event in the next week could impact the market’s trajectory. Economic experts suggest that the anticipated interest rate hike by the Bank of Japan (BOJ) could slow Bitcoin’s bullish momentum.
Will the BOJ play spoilsport?
After suddenly falling to $89,256 earlier this week, Bitcoin has recovered some of its losses and is trading near the psychologically important $100,000 level. The leading cryptocurrency is gearing up for a potential new chapter under the Trump administration, whose campaign has prominently featured pro-crypto regulatory policies.
However, optimism A possible decision by the BOJ to raise interest rates could soften those around Trump’s presidency. according to a chart As shared by analyst Michael Cramer on X, there is a 90% chance that the BOJ will announce a rate hike on January 24.
It is worth remembering that in August 2024, the BOJ’s interest rate hike triggered the infamous yen carry trade, which caused the price of Bitcoin to fall to $49,000. If the rates are increased again this year, a similar situation may arise.
Higher interest rates generally strengthen the Japanese yen, reducing the attractiveness of riskier assets like Bitcoin. This is because increased rates lead to less liquidity and higher borrowing costs, making speculative investments less attractive to those seeking high-risk, high-reward.
This dynamic was seen during the US Federal Reserve (Fed) interest rate hike in March 2022, which was aimed at curbing rising inflation but had a significant impact on crypto assets.
It is worth noting that since 2016, the BOJ has maintained negative interest rates. However, in 2024, the central bank raised rates twice, from -0.1% to 0.25%. Although the expected rate for the upcoming meeting is 0.45%, this could change based on Japanese inflation data to be released on January 23.
If the inflation print exceeds expectations, it could destabilize digital asset markets, increasing the chances of another yen carry trade opening up. Notably, year-on-year headline inflation stands at 2.9%, the highest since August 2024.
Bitcoin reaction is difficult to predict
Although the interest rate hike by the BOJ is being seen as bearish for digital assets including BTC, it is not certain that the digital asset will decline after the rate hike announcement.
For example, BTC held Regular That’s despite the US Fed suggesting a lower interest rate cut in 2025 than initially expected earlier this month. The central bank’s decision to slow down interest rate cuts is largely due to sticky inflation pressures.
So said crypto entrepreneur Arthur Hayes Prediction ‘Annoying Dump’ could be seen in crypto around Trump’s inauguration. At press time, BTC is trading at $98,212, down 1.1% over the past 24 hours.
Featured image from Unsplash.com, X and chart from tradingview.com
