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Bitcoin Maintains Resilience Above $34K Post Hawkish BOJ Announcement

Oct 31, 2023 at 08:22 am

Since 2016, the Bank of Japan's yield curve control initiative has been a crucial source of liquidity in financial markets. Bitcoin (BTC) is maintaining its position above $34,000 even after the Bank of Japan decided to loosen its hold on the “yield curve control” (YCC) program, countering the Federal Reserve's move towards reduced liquidity.

At the time of reporting, the leading cryptocurrency, according to Bitsday data, was trading at $34,300, showing a slight decrease of 0.18% over the past 24 hours. On Tuesday, the central bank kept the short-term policy rate unchanged at -0.1%, continuing its policy of negative interest rates. However, the BOJ stated that it would now view the 1% upper limit for 10-year government bond yields as a "guideline" rather than an absolute cap. This adjustment will permit more flexibility in yields and alleviate the pressure on the BOJ to intervene with bond purchases every time the 10-year yield approaches the previous 1% limit.

Bitcoin has a history of responding to shifts in global fiat liquidity, and the Bank of Japan’s yield curve control policy has been a significant source of liquidity since 2016. This move by the BOJ aligns with Monday's report in Nikkei, which indicated that the bank would adopt a more adaptable stance, potentially allowing the benchmark yield to exceed 1%. The USD/JPY pair rebounded from 149.20 to 150, indicating that traders were anticipating the BOJ to raise the cap to either 1.25% or 1.5%.

According to some experts, the BOJ's recent adjustment signifies a subtle shift away from the dovish YCC program, which urges traders of risk assets sensitive to liquidity, including cryptocurrencies, to exercise caution. Rishi Mishra, a rates strategist, remarked on X,

 “The crucial statement from the BOJ - 1% is now a 'flexible' upper limit (guideline) and will not be as strictly enforced. This, along with the upward revision of inflation projections, makes this the most hawkish the BOJ has been in a while... just not as hawkish as the Nikkei leaks suggested.”

The International Monetary Fund (IMF) has advised the Bank of Japan to abandon YCC and prepare for potential tightening or interest rate hikes in the future.

Read more: Institutional Interest Drives Bitcoin's Recent Impressive Performance, JPMorgan Reports

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