Bank of Japan Eyes First Rate Hike in 17 Years, What’s Ahead for Bitcoin and Crypto?

This week marks a significant moment for both the cryptocurrency and global financial markets, with major central banks, including those of Japan, the US, and Australia, set to announce pivotal decisions regarding interest rate adjustments. Notably, the Bank of Japan (BoJ) will commence its two-day policy meeting on Monday, March 18. Reports suggest that the BoJ may end its longstanding policy of negative interest rates, marking its first rate hike in 17 years.

Bank of Japan Rate Hike Ahead

There’s growing speculation that the Bank of Japan (BOJ) may increase its key interest rate on Tuesday following Japan’s largest union group announcing the strongest wage deals in over three decades. This anticipation has led to a slight decline in the yen against the dollar during Asian trading hours.

In Asian trading, the MSCI Asia Pacific Index saw gains, buoyed by a rally in Japan, particularly driven by a weaker yen. The tech-heavy Nikkei 225 index experienced its most significant surge in a month. Conversely, US equity futures rose after the S&P 500 declined by 0.7% on Friday.

According to data compiled by Bloomberg, swaps traders have priced in approximately 28 basis points worth of rate hikes for this year, with the likelihood of a March hike estimated at around 54%. Goldman Sachs anticipates that the BOJ will raise rates in response to the wage increases and reports suggesting the short-term rate will be in the 0%-0.1% range. In a note to investors, Goldman Sachs Group Inc. economist Tomohiro Ota wrote:

“These developments imply that the BOJ probably no longer needs more data for the policy change, nor to wait to justify the policy change with the quarterly Economic Outlook report in April”.

What’s Ahead of Bitcoin and Crypto?

This could be another week of major volatility in Bitcoin and the broader cryptocurrency market. During the last weekend, the Bitcoin price tanked under $65,000, however, recovered quickly and is currently trading 3.27% up at a price of $68,620.21 and a market cap of $1.348 trillion. 

Analysts at QCP Capital note a significant shift in sentiment, as heavy selling of BTC puts indicates dissipating fear among investors, who appear eager to seize buy-the-dip opportunities. Furthermore, there is notable interest in long-dated September and December BTC calls, targeting price levels between 100,000 to 150,000 USD, suggesting growing optimism or ‘greed’ in the market.

However, concerns loom over Ethereum (ETH) as perpetual funding turns negative and risk reversals continue to exhibit a downside skew. Despite the ongoing rally in alternative cryptocurrencies (altcoins), apprehension persists regarding the potential for a downturn in ETH prices.