29 Apr

With all the signs of central bank intervention, the sinking yen (JPY) abruptly changed course and spiked versus the dollar on Monday, causing Bitcoin (BTC) to trade at a modest premium on Japanese markets.

According to TradingView graphing data, the bitcoin-JPY pair on the well-known Japanese cryptocurrency exchange bitFlyer traded at a premium of approximately 0.2% over the price of bitcoin denominated in dollars on the Nasdaq-listed Coinbase (COIN).

In recent weeks, the top cryptocurrency by market capitalization has regularly gained value in Japanese yen. The premium increased to 1.49% at the beginning of this month, the highest level since March 2020, indicating that traders were diversifying into non-yen assets to avoid the yen's volatility.

"The premium for bitcoin on Japanese markets is currently between 0.3% and 0.4%; it was as high as 1.7% a year ago in mid-March, although it had dropped from over 1% in mid-April. That might alter, though. Overall, FX volatility is rising as a result of geopolitical tension and increasingly diverging monetary policy assumptions, and this could have an effect on cryptocurrencies," according to Dessislava Aubert, an analyst at Paris-based Kaiko.

In a trading session that was shortened due to holidays in Japan on Monday, the yen saw tremendous swings. It began the day down 500 basis points (pips) against the US dollar, its lowest level in 34 years, but it quickly recovered to 155 pips against the US dollar in the early hours of European time.

The speed and scope of the recovery sparked speculation that the BOJ will step in or sell dollars to support the yen. The abrupt yen increase, according to local media, was caused by poor liquidity conditions and a warning of possible central bank action around 160 pip levels. The media did not confirm nor deny the reported BOJ move.

Due to the Bank of Japan's (BOJ) inability to match US interest rates, investors have lost interest in the yen. Put differently, the FX market has been reflecting Japan's budgetary woes.

This week's policy meeting of the Federal Reserve (Fed) may emphasize the necessity of maintaining high interest rates at 5.25% for an extended period of time in the face of persistently high inflation.

The BOJ raised the benchmark interest rate above zero early this year, but this week it remained at 0-0.1%. Throughout the Fed's 2022–2023 tightening cycle, the central bank maintained an ultra-lose monetary policy, which encouraged traders to sell the yen. 

April 2024, Cryptoniteuae

* The email will not be published on the website.