In the cryptocurrency world, has the bad news run its course and is a change coming?

After the Bitcoin weekly close, it directly retraced, and now it’s almost at the key level of 85000 USD～ Previously, it was mentioned to see if it could recover to 90800 USD, but the market didn’t see much movement over the weekend due to the US holiday, just hovering above 90800. Who would have thought that the Bank of Japan suddenly 'turned hawkish', hinting at a possible interest rate hike in December? US stock futures and Bitcoin were both affected by liquidity; Bitcoin couldn’t hold the key level and retraced again. 😮

Why does the possibility of Japan raising interest rates have such a big impact? Just look at the data; Japan's 2-year government bond yield has skyrocketed past 1%, and coupled with the central bank's recent actions, the market believes the probability of a rate hike in December is over 60%, and even up to 90% in January next year. It’s important to note that Japan has had three decades of stagnation with long-term low/negative interest rates, making borrowing extremely cheap. Institutions love to borrow yen to exchange for other currencies to invest in global stocks and bonds for arbitrage (this is known as yen carry trade). Once Japan raises interest rates, borrowing costs will increase, and highly leveraged players will have to liquidate their positions, selling off US stocks, treasury bonds, and other assets, significantly withdrawing liquidity from the market. Furthermore, the market is more concerned that Japan will exit its long-term loose monetary policy, which would cool off the yen carry trade that injects liquidity into the global market. This would have a clear short-term impact on liquidity-sensitive markets, and risk assets like Bitcoin will certainly bear the brunt of it～

However, don’t panic too much; a rate hike in Japan is just a short-term shock. The larger influence on global liquidity levels still comes from the Federal Reserve. On December 1st, the Federal Reserve has already stopped tapering, and on December 10th, the probability of a rate cut by FOMC is over 80%, indicating a trend towards easing. But currently, the US is in a standstill, and events like Japan raising interest rates may disturb short-term liquidity. The global financial system is inherently interconnected, and coupled with the uncertainty brought by policies over the past year, Bitcoin has also suffered quite a bit. 😔

In the short term, keep a close eye on the 85000 USD support level, with the core focus on the reaction after the US stock market opens. If it can hold, there’s a high probability of a rebound this week, forming a short-term double bottom to challenge 90800 USD again; if it directly breaks down, there’s little support until 74000 USD, and the price may quickly test lower. ⏬