Bitcoin price bounces off $16,300, the reason is a boon

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Bitcoin price slipped again yesterday, falling below the $16,300 level. At $16.285, BTC hit a price last recorded on November 29. However, a surprising windfall occurred when the Bank of Japan (BoJ) announced a tacit pivot.

The BoJ has significantly widened its yield curve control band to 0.50% and has 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 yield curve control policy. All economists expected the BOJ to leave policy unchanged.

BoJ sends shockwaves through all markets

As noted by Jim Bianco of Bianco Research, this is a critically important decision for all markets. This decision is also essential for Bitcoin and the broader crypto market, although it may not seem so at first glance. The crypto market always follows market trends and stocks. Additionally, risky assets like Bitcoin become unattractive when interest rates reach record highs.

Following this decision, the yen appreciated by nearly 3%, to its highest level since mid-August. Meanwhile, stocks, bonds and the dollar fell. The yen also made strong 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 in 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 more than 50% of a market, is it still a market? $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 view on central bank policy changes:

If Japan is now concerned about inflation, there will be no rate hike pivot anywhere in 2023! Powell is a warmonger. ECB director Legarde (Madame Laggard) now speaks hawkishly. Kuroda and the BoJ are not taking actions that show concern about inflation.

Bloomberg’s Yuki Masujima said:

The implications go far beyond Japan – with the BOJ – the last major obstacle to global monetary tightening (excluding China) – now leaving the benchmark yield to trade higher than before, the shock will affect global financial markets.

Implications for Bitcoin

As analyst Holger Zschaepitz explained in a previous tweet, Bitcoin’s initial reaction may have been triggered by the fact that the price was strongly correlated to rising central bank balance sheets. “Bitcoin traded in tandem with the combined balance sheets of the Fed, BoJ and ECB,” Zschaepitz noted.

Bitcoin was up around $750 or 2% following a dump after stocks closed after hours. At press time, BTC was trading at $16,753. It is likely to go even higher if it breaks above $16,900, which turned out to be too strong resistance on the first attempt.

Bitcoin price, 4 hour chart

Featured Image from iStock, Charts from TradingView.com

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