Finally fully revived. After reviewing today's market, the drop in #BTC is likely due to Ueda's interview in Tokyo last Thursday (Nikkei News), the content of which was released on Saturday and began to ferment on Monday.
Ueda said in an interview: "If we have confidence or certainty that the economy will develop as predicted in our economic and price outlook, especially that the core inflation rate will rise to 2%, we will adjust the degree of monetary easing at the appropriate time. From the perspective of economic data getting back on track, the next rate hike is approaching."
The next policy meeting of the Bank of Japan will be held on December 18-19, followed by another meeting on January 23-24 next year. From Ueda's current statements, the probability of a rate hike in December is quite high. Of course, Ueda hasn't clearly outlined the path for a December rate hike like Powell, but in any case, it's evident that a rate hike in December or January is inevitable.
But for friends in the crypto space, they don't really care whether Japan raises rates or not; what matters more is the impact on the cryptocurrency industry. In simple terms, will Japan's rate hike bring negative news to the crypto space?
For a long time, the low interest rate of the yen has been the main funding currency for global arbitrage trades. Investors borrow low-interest yen and invest in high-yield assets to earn the interest differential. However, rate hikes increase the borrowing cost of yen, raising the risk of arbitrage trades. To reduce risk, arbitrageurs are forced to sell other assets to repay yen debts, leading to a decrease in market liquidity.
I previously wrote a more detailed tweet using $BNB as an example. Interested friends can take a look at the quoted tweet, which can help better understand the impact of yen rate hikes.
That said, Japan's rate hike will indeed have an impact on the risk market, but this impact is relatively low for the crypto space, especially since it is highly likely that Japan will raise by 25 basis points this time, with rates rising to 0.5%, which is not a significant impact. Secondly, cryptocurrencies are not the main subjects for stable arbitrage; after all, #BTC and #ETH have significant volatility, and even in futures arbitrage, cryptocurrencies may not necessarily be chosen.
Overall, in terms of actual execution, Japan's rate hike will not have a significant impact, but on an emotional level, it may trigger panic among some investors. Moreover, timing-wise, the rate hike coincides with just before Christmas, after Microsoft's vote. Therefore, this timing may be very unfavorable emotionally. If Microsoft votes negatively, and a week later Japan raises rates, followed by the lowest liquidity period during Christmas, it is very likely that negative effects will accumulate.
So for those in a game state, the vote on December 11 may be the most important long-short game of 2024, and the upcoming trends are likely to be more turbulent.
This tweet is sponsored by @ApeXProtocolCN | Dex With ApeX
