Bitcoin (BTC) and Ethereum (ETH) have both seen price declines at the start of September, continuing a trend that began earlier in the month. The bearish sentiment towards these leading cryptocurrencies, and the wider crypto market, can be attributed to several macroeconomic factors. One of the key factors impacting the market is the recent surge of the Yen against the US dollar, leading investors to sell off riskier assets like Bitcoin and Ethereum. The unwinding of carry trade positions, which previously utilized the low-yielding Yen, has put additional selling pressure on these cryptocurrencies.
Hedge fund manager James Lavish highlighted the ongoing effects of the Yen carry trade, noting the drop in the Nikkei 225 and the decline in the USD/Yen trading pair. The recent hawkish statement by the Bank of Japan suggesting potential rate hikes in the future has further fueled fears among traders, prompting them to close their carry trade positions. As a result, Bitcoin and Ethereum have faced significant price losses following the market crash on August 5, triggered by the BOJ’s decision to increase interest rates.
The correlation between Bitcoin, Ethereum, and the US stock market has also played a role in the recent price crashes. On September 3, the stock market experienced a substantial loss of over $1.05 million, causing panic in the crypto market and leading to a wave of sell-offs for Bitcoin and Ethereum. This was reflected in the outflows from both Spot Bitcoin and Ethereum ETFs, with significant net outflows recorded on that day.
The current bearish outlook for Bitcoin and Ethereum highlights the importance of a potential catalyst that could reverse the trend and provide bullish momentum for the crypto market. With ongoing macroeconomic factors driving price declines and uncertainties surrounding future rate hikes by the Bank of Japan, investors are cautiously monitoring the market for any signs of a turnaround. As the crypto market remains volatile, traders and analysts are closely watching for developments that could potentially shift the market sentiment towards a more positive trajectory.
