Market Focus Shifts to Trump Inauguration and Bank of Japan’s Potential Rate Hike
As Bitcoin (BTC) and the broader cryptocurrency market await the potential impact of President-elect Donald Trump’s inauguration on January 20, investors are also closely monitoring developments in Japan. A possible rate hike by the Bank of Japan (BoJ) on January 24 could pose a challenge for Bitcoin’s price.
According to a Bloomberg chart shared by analyst Michael Kramer on X, the market is currently pricing in a 90% probability of the BoJ raising rates later this month. This move comes after a similar rate hike in 2024, which contributed to significant volatility in both traditional and digital asset markets, notably causing a Yen carry trade unwind in August 2024, sending Bitcoin crashing to $49,000.
With a similar market response anticipated this time around, traders are bracing for another potential selloff. Since 2016, the BoJ has kept interest rates negative, but in 2024, they raised rates twice—from -0.1% to 0.25%. The implied rate going into the January 24 meeting is 0.45%, but this could change significantly based on Japan’s inflation report on January 23.
The latest report shows headline inflation year-over-year at 2.9%, the highest level since August 2024. A higher-than-expected inflation figure could trigger market concerns, potentially leading to another round of Yen carry trade unwinding and a subsequent dip in Bitcoin’s price.
Meanwhile, the U.S. Dollar Index (DXY), currently at 109, has been on a strong upward trajectory, the highest since November 2022, up from a low of 100 in September. The DXY index tracks the value of the U.S. dollar against a basket of major currencies and has historically shown similar patterns to Trump’s first presidential term. Leading up to his inauguration, the DXY rallied before significantly dropping, which provided a boost to risk assets like Bitcoin.
Currently, the Japanese Yen is at its strongest level against the dollar since December 16, trading at 156. Investors will be keeping a close eye on these macroeconomic factors, as they could heavily influence the next move in the cryptocurrency market.
