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According to Matrixport’s latest analysis report, the main reason for Bitcoin’s collapse is the liquidation of yen carry trade transactions. Many financial market participants borrow Japanese yen to invest in high-yield assets. However, recently, these positions are being reversed, and Bitcoin is also being affected by this process.
Role of Central Banks
The unexpected interest rate hike by the Bank of Japan caused a major shock in the market. The rate hike led investors to exit risky assets. At the same time, the anticipated interest rate cut by the American Federal Reserve increased uncertainty in the markets. The policies of these two central banks reduced leverage in the financial system, causing Bitcoin and other cryptocurrencies to lose value.
Besides Bitcoin, other cryptocurrencies were also negatively affected by this process. Investors exiting risky assets led to a massive sell-off in the cryptocurrency market. This situation shook many investors’ confidence in cryptocurrencies and caused significant volatility in the market.
Market Expectations and Yen Carry Trade Transactions
Some investors are repositioning with the expectation that the American Federal Reserve will cut interest rates. This expectation increases uncertainty in the markets and makes investors more cautious. During this process, the prices of Bitcoin and other cryptocurrencies continue to fluctuate.
Yen carry trade transactions refer to the strategy of borrowing Japanese yen at low interest rates and investing these funds in high-yield assets. This strategy becomes challenging with the Bank of Japan’s interest rate hike, forcing investors to close their positions. This causes selling pressure on high-risk assets like Bitcoin.
What Lies Ahead?
In the coming period, central bank policies and global economic developments will continue to affect cryptocurrency markets. The future of Bitcoin and other cryptocurrencies will be shaped amidst these uncertainties. Investors need to be cautious during this process and closely follow market dynamics.
Matrixport’s analysis once again highlighted how fragile Bitcoin and cryptocurrency markets are. Central bank policies and global economic developments deeply affect the markets and force investors to reassess their strategies. During this process, the future of Bitcoin and other cryptocurrencies remains uncertain and continues to be a significant risk factor for investors.
