Bitcoin Passes Yen Stress Test, But More Violent Moves Ahead?
Japan's yen intervention had a significant impact on the cryptocurrency market in August 2024, causing a sharp selloff that forced investors to dump risk assets. The yen strengthened by 3.7% in three sessions, but this time around, Bitcoin held above $79,000, avoiding a similar fate. This is seen as a useful stress test for traders who were caught off guard last year.
The danger of the previous move was its speed, and experts flagged the risk on September 1 when the yen was near 159.75 per dollar. In August 2024, a similar rush out of yen-funded trades forced investors to dump risk assets, causing Bitcoin and Ethereum to fall as much as 20%.
Japan's foreign reserves fell $94.6 billion in August to $995 billion, suggesting that the country sold short-dated US Treasuries to fund the intervention. This creates a political problem for Japan, as selling US Treasuries could attract pressure from the US. The Bank of Japan is likely to raise interest rates next week and continue hiking until January 2027.