Analysis: The upcoming yen interest rate hike is unlikely to trigger risk aversion in the cryptocurrency market.
PANews reported on December 13th, citing CoinDesk, that the Bank of Japan's last interest rate hike caused the yen to appreciate, triggering a sharp rise in market risk aversion and causing Bitcoin's price to fall from approximately $65,000 to $50,000. However, the upcoming yen rate hike is unlikely to trigger risk aversion in the cryptocurrency market for two reasons: First, speculators currently hold net long (bullish) positions in the yen, making a rapid reaction to the Bank of Japan's rate hike unlikely; second, Japanese government bond yields have continued to climb this year, with both short-term and long-term yield curves reaching multi-decade highs. Therefore, the upcoming rate hike reflects official rates catching up with the market. Meanwhile, this week the Federal Reserve lowered interest rates by 25 basis points to their lowest level in three years while introducing liquidity measures. Taken together, these factors suggest a low probability of significant unwinding of yen carry trades and year-end risk aversion.
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