Introduction to the US Crypto News Morning Briefing
The US Crypto News Morning Briefing provides an essential rundown of the most important developments in crypto for the day ahead. Today’s briefing focuses on the contrasting monetary policies of the US Federal Reserve and the Bank of Japan (BOJ), and their impact on global liquidity, currencies, and crypto markets.
Crypto News of the Day: Japan Raises Interest Rates, But the Fed Cuts
Global markets are currently at an impasse due to a rare and consequential policy divergence between the US and Japan. The US Federal Reserve has begun cutting interest rates to support slowing growth, while the BOJ is raising rates to levels not seen in three decades. The question facing investors is which of these moves will ultimately carry more weight for global liquidity, currencies, and crypto markets.
The BOJ raised its policy rate by 25 basis points to 0.75% on December 19, marking another step away from decades of ultra-loose monetary policy. Macro analysts see this move as more than a routine adjustment, as it signals a significant shift in Japan’s monetary policy. The hike is expected to have a major impact on global liquidity, as Japan’s era of ultra-easy money comes to an end.
Impact on Global Markets
The immediate impact of the BOJ’s rate hike was visible in currency markets, with the yen initially weakening due to the lack of clarity on the pace of future tightening. However, analysts argue that the real transmission channel lies in the yen carry trade, which has been a key source of cheap leverage for global markets. As Japanese yields rise and the US-Japan rate gap narrows, borrowing yen to fund higher-yielding positions becomes increasingly expensive.
Comparison of Fed and BOJ Policies
The divergence between the Fed’s rate cuts and the BOJ’s tightening has significant implications for global markets. While the Fed’s cuts tend to support markets gradually by easing credit conditions, the BOJ’s tightening forces immediate repositioning as leverage costs rise. Crypto markets have historically experienced this impact more quickly than traditional assets, with previous BOJ tightening cycles coinciding with sharp Bitcoin drawdowns of 20-30% as liquidity tightened and carry trades unwound.
Current Market Performance
Despite the potential risks, Bitcoin has shown resilience in recent days, trading at around $88,035 as of the latest update. However, altcoins remain exposed to liquidity risks if Japanese tightening continues. Analysts at ING and Bloomberg have warned that while further hikes may not be imminent, the direction of travel is clear, and the BOJ is likely to continue tightening if wage growth and inflation remain durable.
Chart of the Day
The chart below shows the comparison between the Fed Fund Rates and the BOJ Policy Rate, highlighting the divergence in monetary policies between the two central banks.
Byte-Sized Alpha
Here’s a summary of more US crypto news to follow today:
- Strategy (MSTR) is up 3.62% in pre-market trading
- Coinbase (COIN) is up 2.84% in pre-market trading
- Galaxy Digital Holdings (GLXY) is up 1.95% in pre-market trading
- MARA Holdings (MARA) is up 1.86% in pre-market trading
- Riot Platforms (RIOT) is up 2.62% in pre-market trading
- Core Scientific (CORZ) is up 3.30% in pre-market trading
Conclusion
In conclusion, the policy divergence between the US Federal Reserve and the Bank of Japan has significant implications for global liquidity, currencies, and crypto markets. While the Fed’s rate cuts may provide broad support over time, the BOJ’s tightening strikes directly at the foundation of global leverage. As the BOJ continues down this path, its influence on liquidity, currencies, and crypto could outweigh US easing, at least in the near term. Investors should closely monitor the developments in both economies and adjust their strategies accordingly to navigate the changing market landscape.
