- The Bank of Japan raised its benchmark interest rate to around 1%, its highest level in over three decades.
- Crypto markets remained stable despite the hike, aided by a recent relief rally from geopolitical developments.
- Traders had reduced leveraged positions beforehand, leaving less room for a significant selloff to occur.
On Tuesday, cryptocurrency markets demonstrated resilience as the Bank of Japan implemented a significant monetary policy shift, raising its benchmark interest rate to around 1%. This quarter-point move marks the highest rate in Japan since 1995, driven by concerns over domestic inflation fueled by higher oil prices.
Consequently, policymakers flagged a risk of inflation rising above their 2% target. The decision was made in a 7-1 vote, with the new guideline effective June 17.
However, the crypto market had already experienced a relief rally days earlier. This followed President Trump’s announcement of a deal with Iran, which eased Middle East tensions linked to those rising oil prices.
Consequently, Bitcoin climbed above $65,000 from the low $60,000s prior to the rate decision. At the time of publication, it was trading around $66,000, down only 1.1% on the day.
Meanwhile, traders appeared to have braced for potential volatility. Open interest in Bitcoin futures eased, data shows, suggesting a reduction in leveraged positions that limited the potential for a sharp selloff.
The hike pressures the yen carry trade, where investors borrow cheap yen to buy higher-yielding assets like crypto. Analyst Ryan Yoon noted, “The Yen carry trade has failed to trigger any meaningful disruption in either crypto or global equities this time around.”
He added that the market had processed this narrative, and the scare lost its power to move prices. Maksim Balashevich of Santiment stated the hike held less importance because it was already priced in.
The Bank of Japan paired its hike with a pledge to step up bond purchases if yields rise sharply. This action was intended to limit how far the move tightened financial conditions.
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