According to CoinDesk, Bitcoin (BTC) has been less volatile recently, and the Federal Reserve’s interest rate hike on Wednesday failed to wake up the cryptocurrency. The Bank of Japan (BOJ) may change this. Investment banks predict that the BOJ may loosen its grip on the Japanese bond market on Friday, affecting global bond markets, exchange rates and liquidity conditions. Bitcoin and cryptocurrencies are sensitive to changes in global liquidity conditions.
Since September 2016, the BOJ has been implementing a yield curve control (YCC) program, committing to purchase as many government bonds as possible to bring the 10-year government bond yield close to 0%. Long-term bond purchases increase global liquidity and are a major source of downward pressure on developed country bond yields. On Friday, the central bank may widen the fluctuation range to 100 basis points, indirectly reducing bond purchases to increase liquidity.
In the past, cryptocurrencies have been negatively correlated with bond yields, bond market volatility, the U.S. dollar index, and global liquidity conditions. In other words, potential adjustments to YCC by BOJ and volatility in traditional markets could bring volatility to the crypto market.
