Most investors have their eyes on President Trump’s inauguration on January 20, which could become a key catalyst for bitcoin (BTC) and cryptocurrency prices.
However, a few days later, a potential rate hike was considered by the Bank of Japan (BoJ). According to a Bloomberg chart shared by analyst Michael Kramer on X, the market is currently pricing in a 90% chance of a rate hike on January 24.
Previously, the BoJ rate hike wreaked havoc on the traditional and digital asset market. This was a key catalyst for the unwinding of the yen carry trade in early August, which sent bitcoin down to $49,000. Traders are likely bracing for another sell-off this time around.
Since 2016, the BoJ has maintained negative interest rates; however, in 2024, they increased interest rates twice, from -0.1% to 0.25%. The implied rate before the meeting is 0.45%; However, this could change drastically since Japan released its inflation report the day before, on January 23.
Overall one-year inflation stood at 2.9%, its highest level since August. A higher-than-expected inflation reading could create fears within the market, and another iteration of the yen carry trade unwinding could be underway.
Even with the remarkable strength of the DXY Index, which currently sits above 109, the highest level since November 2022, it fell from 100 to September’s low.
The DXY index is following a similar trajectory to Donald Trump’s first presidential term, which saw a rally in the DXY before his inauguration and then a considerable fall, providing a much-needed boost to risk assets. The DXY Index measures the value of the U.S. dollar against a basket of major foreign currencies.
The Japanese yen is at its highest level against the dollar since December 16, at 156.
Read more: Bank of Japan governor hints at further rate hikes; BTC drops 0.4%
