Bitcoin Likely to Be Affected by Fluctuations in Ishiba and Yen

Bitcoin (BTC) fell 3.5 percent yesterday, with at least half of the losses recorded during European trading hours.

Market experts attributed this decline to losses in Japan’s Nikkei index after Shigeru Ishiba was elected Prime Minister of Japan.

The Japanese yen weakened across the board early yesterday morning, challenging the narrative that Ishiba was putting pressure on risk assets including BTC.

USD/JPY parity rose 1% yesterday, while AUD/JPY parity, which is seen as a risk barometer by analysts, rose 1.15%, creating a positive environment for bitcoin and other risk assets. The fact that both parities continue to rise indicates that the yen’s depreciation continues and a risky environment.

Markets do not currently appear to be worried about Ishiba’s pro-monetary tightening image and potential interest rate hikes by the Bank of Japan (BOJ). The central bank raised interest rates in late July, triggering a broad-based unwinding of risky transactions financed by JPY loans. During these developments, BTC dropped from approximately $65,000 to $50,000 in a matter of days.

The yen, not the Nikkei, is attracting attention as the Japanese currency is a “US recession trade,” according to Amundi Investment Solutions.

“Repatriation of Japanese assets does not pose a significant risk at this time, but the potential for a major market impact is always possible,” the firm said in a recent blog post.