Bitcoin Drops Back Below $64,000 Following Japan’s Unexpected Prime Ministerial Election, Triggering 5% Drop in Nikkei

Overbought conditions surely played a role in Bitcoin’s plunge on Monday as well.

After a rapid surge of roughly 14% following the US Federal Reserve’s 50 basis point rate cut nearly two weeks ago, conditions seemed ripe for something to trigger a sizable BTC sell-off, and the selection of a new prime minister in Japan over the weekend seemed to be the trigger.

In a surprise election, that country’s ruling party chose Shigeru Ishiba as its next prime minister. Without going too much into the internal politics of Japan’s Liberal Democratic Party, Ishiba is commonly believed to support the Bank of Japan’s plan to return to normalcy in monetary policy — namely higher interest rates. Following his election as prime minister, Ishiba called for a snap election for late October.

Recall that it was the BOJ’s very modest rate hike in late July that caused a violent disconnect in the so-called yen carry trade and subsequently a global panic in financial markets, sending bitcoin down from roughly $70,000 to under $50,000 in the space of a few days.

The sell-off was so nasty that the BOJ had to send a former official to try to calm markets by saying the bank would not raise rates again in 2024.

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