Most investors have their eyes set on President Trump’s inauguration on January 20, which has the potential to be a key catalyst for bitcoin (BTC) and cryptocurrency prices.
However, a few days later, the Bank of Japan (BoJ) is considering a possible rate hike. According to a Bloomberg chart shared by analyst Michael Kramer on X, the market is currently pricing in a 90% chance of a rate hike on January 24.
Previously, the BoJ rate hike wreaked havoc on both the traditional and digital asset markets. This was a key catalyst for the yen carry trade to ease in early August, causing bitcoin to fall to $49,000. Traders are likely preparing for another sell-off this time around.
Since 2016, the Bank of Japan has maintained negative interest rates; However, in 2024 they increased interest rates twice, from -0.1% to 0.25%. The implied rate before the meeting is 0.45%; However, this could change drastically as Japan has an inflation report just the day before on January 23rd.
Headline year-over-year inflation is 2.9%, the highest since August. A higher-than-expected inflation figure could create fears within the market, and another iteration of the yen carry trade reduction could be underway.
Even with the notable strength of the DXY index, which is currently above 109, the highest level since November 2022, it has jumped from 100 from the September low.
The DXY index is following a similar trajectory to Donald Trump’s first presidential term, which saw a rally in the DXY before his inauguration and then fell sharply, giving risk assets a much-needed boost. The DXY index measures the value of the US dollar against a basket of major foreign currencies.
The Japanese yen is at its highest level against the dollar since December 16, at 156.
Read more: Bank of Japan governor hints at more rate hikes; BTC falls 0.4%
