The Bitcoin price slipped further yesterday, falling below the $16,300 level. At $16.285, BTC reached a price last recorded on November 29. However, a surprising windfall occurred when the Bank of Japan (BoJ) announced an unspoken pivot.
The BoJ drastically widened its yield curve control band to 0.50% and significantly increased the number of government bonds it will buy each month. In doing so, the central bank sent shockwaves through global markets after unexpectedly revising its policy to control the yield curve. Every economist had expected the BOJ to leave its policy unchanged.
BoJ Sends Shockwaves Through All Markets
As Jim Bianco of Bianco Research noted, this is a decision of paramount importance for all markets. This decision is also essential for Bitcoin and the broader crypto market, even though it may not seem so at first glance. The crypto market still follows market trends and stocks. Moreover, risk assets like Bitcoin become unattractive when interest rates are at record highs.
As a result of the decision, the yen rose nearly 3%, to its strongest level since mid-August. Meanwhile, stocks, bonds and the dollar tumbled. The yen also made significant gains against currencies such as the euro, while gold and bitcoin rose.
Remarkably, the share of Japanese government bonds held by the Bank of Japan, measured by market value, also exceeded 50% for the first time. Due to the massive market impact, BitMEX founder Arthur Hayes made a (funny) comparison between FTX and the FTT token.
It’s like the BOJ is taking lessons from @SBF_FTX. When you own over 50% of a market is it even a market anymore? $FTT = $JGB pic.twitter.com/OePV7VLmf1
— Arthur Hayes (@CryptoHayes) December 20, 2022
However, as Bianco tweeted, the bottom line is that markets “may” need to rethink their views on central bank policy changes:
If Japan is now showing concern for inflation, there will be no pivots of any rate hikes in 2023 anywhere! Powell is hawkish. ECB head Legarde (Madam Laggard) is now talking hawkish. Kuroda and the BoJ are not making moves that show concern about inflation.
Yuki Masujima of Bloomberg said:
The implications go far beyond Japan – with the BOJ – the last major holdout in a global monetary tightening shift (with the exception of China) – now letting the benchmark yield trade higher than before, the shock will echo across global financial markets.
The Implications For Bitcoin
As analyst Holger Zschaepitz explained in an earlier tweet, Bitcoin’s initial reaction may have been triggered by the price being highly correlated with rising central bank balance sheets. “Bitcoin has traded in tandem w/combined balance sheets of Fed, BoJ and ECB,” Zschaepitz noted.
Bitcoin was up about $750 or 2% following a dump after equities closed after-hours. At press time, BTC was trading at $16,753. It is likely to go even higher if it breaks through $16.900 which proved to be too strong a resistance at the first attempt.
