Bitcoin Stable at $64K Amid Yen Drop, Signals Currency Shifts

Key Takeaway

• Bitcoin remains stable around $64K amidst Japanese yen's significant drop, hinting at potential global currency turmoil.
• BOJ's lack of concern over the yen's fall could lead to interventions affecting crypto markets, with possible impacts from U.S. policy responses.
• Rising U.S. yields and currency volatility may drive increased corporate and sovereign investments in hedges like bitcoin and gold.

Calm in Crypto Amid Yen's Tumble

Cryptocurrencies displayed unusual stability on Friday, even as the Japanese yen experienced a significant drop to a 34-year low against the U.S. dollar. Bitcoin (BTC) saw a minor decline of 0.9% over the last 24 hours, maintaining a tight range around $64,000. Meanwhile, the broader CoinDesk 20 Index (CD20) witnessed a slight dip, with notable tokens such as Solana (SOL), ICP, and Uniswap's UNI falling between 2%-4%. This calm in the crypto market contrasts sharply with the yen's 1.3% fall during the day, a substantial move for a major currency, especially after the Bank of Japan (BOJ) decided to keep interest rates near zero without expressing significant concern over the yen's weakening.

Potential Market Shifts on BOJ Intervention

The possibility of the Bank of Japan intervening to support the yen has raised speculation about its impact on crypto markets. According to Noelle Acheson, an analyst and author, a BOJ intervention could theoretically bolster crypto prices if it involves selling U.S. dollar assets to purchase yen, potentially weakening the greenback. Quinn Thompson, founder of Lekker Capital, also suggested that U.S. policymakers might inject liquidity into markets, which could benefit risk assets like cryptocurrencies. This speculation comes amid a backdrop of solid economic growth and high inflation in the U.S., dampening hopes for an easing of monetary policy within the year.

Global Currency Turmoil and Crypto

The recent volatility in the Japanese yen and the potential for broader currency turmoil, as suggested by Acheson, could have significant implications for the crypto market. Acheson predicts that the strain on other currencies, prompted by a jump in U.S. yields, might lead to collective actions by central banks, such as selling U.S. treasuries to support local currencies. This scenario could increase inflationary pressures globally and encourage more corporate and sovereign investments in hedges like gold and bitcoin. The anticipation of such moves underscores the interconnectedness of global financial markets and the potential for cryptocurrencies to benefit from currency volatility.

Street Views

• Quinn Thompson, Lekker Capital (Neutral on the impact of JPY devaluation on crypto markets):

  "Moves of this size and speed in currencies is not normal so I expect some intervention or coordination fairly soon if it continues into the next few weeks."

• Noelle Acheson, Analyst (Bullish on cryptocurrencies as potential hedges):

  "The yen's devaluation didn't impact crypto markets yet, but this could change if the BOJ steps in to prop up the currency... A possible intervention would mean the BOJ selling U.S. dollar assets (U.S. Treasuries) to buy yen, and a weaker greenback could in theory help crypto prices." "We could see a collective selling of U.S. treasuries to raise cash to support local currencies, adding further upside pressure to U.S. yields while adding to inflationary pressures elsewhere... This currency volatility and vulnerability could encourage more corporate and even sovereign holdings of hedges such as gold and bitcoin."