Bitcoin May Drop under $70,000 as Hawkish Japan Policy Might Trigger Risk-Off Sentiment
Bitcoin (BTC) may have a weakened power to resist the sell-off in the next weeks, a few analysts have alerted that BTC could see a significant decline to below $70,000 as a result of a tightening monetary policy in Japan. Some of the market experts position a hawkish Bank of Japan (BoJ) as a dominant macroeconomic risk factor branch that not only affects risk assets but also the crypto world.
For a very long time, Japan has been a major contributor of global liquidity through her super-low benchmark interest rate. Investors have traditionally taken advantage of a cheaply borrowed Japanese yen for their investments in higher-yielding assets such as stocks or Bitcoin. Nevertheless, the anticipation of a BoJ rate hike is troubling this type of trade which, in consequence, is leading the yen carry trade to unwind.
As the yield on Japanese government bonds goes up, the cost of borrowing is becoming more expensive, thus investors are forced to limit their exposure to risky-assets. Analyzing the situation, the experts point out that in the past, similar Bank of Japan tightening signals have been followed by abrupt Bitcoin corrections, sometimes over 20%, whereas this time, the effect might be bubbled out due to the high level of Bitcoin's price and the weak market sentiment.
Moreover, the technical indicators are also in favor of Bitcoin losing its value. Recently, Bitcoin has developed a bear flag pattern, which is a chart pattern that usually indicates the continuation of the downward trend. In case BTC is not able to regain the important resistance levels, the analysts are urging that the support area around $70,000–$72,000 will be visited.
To some extent, a few analysts are still holding on to their hope, although with a heavy dose of caution. They point out that among other factors, one cannot ignore the role of institutional investors, inflows to Bitcoin ETF, and the adoption of Bitcoin over the long term as the main forces pushing the price upwards. Still, in the immediate future, the doomsday scenario for the global economy could very well become the tail wagging the dog of crypto prices. Moreover, the impact of the Japanese government's decisions is expected to be the biggest influence on the direction of the market.
Market participants intend to read the coming communication from the Bank of Japan as if it was the next chapter in a novel with an unexpected twist. If the Bank of Japan clarifies its stance, speculators might need to reconsider their position in crypto; on the other hand, if uncertainty remains, there will be no shortage of wild swings till the cryptos profession has figured out what's really going on.