Bitcoin and Altcoins Await Sinister Danger: Analysts Have Already Warned!

As the markets prepare for the U.S. presidential inauguration ceremony on January 20, 2025, analysts are sounding the alarm about a potential disruption in global market sensitivity: the weakening of the yen carry trade.

This strategy, based on Japan's ultra-low interest rates, is facing significant pressure due to the expectations of an interest rate hike by the Bank of Japan (BoJ).

RedStone Oracles COO Marcin Kazmierczak said in a statement that "The BoJ's interest rate hike is likely to cause a significant relaxation in yen carry trades, which could dampen the enthusiasm of the 'Trump Trade' market."

WeFi Growth President Agne Linge also shared similar concerns, saying that the interest rate hike could lead investors to sell risky assets such as Bitcoin to cover carry trade loans.

Investors have been using the yen carry trade, a long-standing investment strategy where investors borrow yen at low interest rates to invest in higher-yielding global assets, and may face a serious unwinding if the BoJ raises interest rates. Markets are closely watching the BoJ's policy meeting next Thursday and Friday, with speculation that the central bank could raise its short-term interest target from 0.25% to 0.45%.

The hawkish signals from BoJ President Kazuo Ueda and rising Japanese Government Bond (JGB) yields have fueled these expectations. A stronger yen will increase borrowing costs for investors using carry trade and potentially make it more difficult to liquidate global equities and risky assets such as BTC.

Kazmierczak said, "If the BoJ raises interest rates, it could strengthen the yen and cause a fluctuation effect in the global markets, as we saw when Bitcoin dropped from $66,000 to $55,000 within a week in early August 2024, leading to a rapid unwinding of risky asset positions."

The weakening of the yen carry trade could dampen the optimism around the 'Trump Trade,' a term that defines the market optimism surrounding President-elect Donald Trump's growth-oriented policies, according to Kazmierczak. Kazmierczak believes that the effect will be gradual. He said, 'The important thing will be to observe how they will balance local inflation targets against global market stability.'

Bitcoin markets continue to remain particularly fragile. BTC has already seen high volatility as investors monitor both BoJ policies and US economic developments. However, the positive US Consumer Price Index (CPI) data released earlier this week has supported risk sentiment.

Linge said, "Core CPI data showed that inflation rose less than expected" and added, "With the upcoming swearing-in ceremony, there is a high probability of triggering a breakthrough in the Bitcoin price, known as the 'Trump Trade,' bringing it close to an all-time high."