Explaining why BTC$BTC dropped on the news that Japan will hike interest rates

I know I’m a little late to explain this, but it’s still important to understand what actually happened.

First, one important correction

The immediate impact you see on the chart was not institutions. Big banks and institutions don’t react that fast. That first sharp move was mostly retail and algos reacting to the headline.

Moves driven by news like this usually have a delayed impact when it comes to institutions.

Now the bigger picture

For years, Japan’s near zero interest rates made the Japanese Yen the funding currency. Institutions borrowed Yen cheaply, converted it to USD, and deployed that capital into higher yield assets stocks, bonds, and maybe $BTC .