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Bitcoin (BTC) opened December with a more than 5.13% slip in price just when market participants had pinned their hopes on a recovery. Despite this dip, a top analyst, Shanaka Anslem Perera, insists that the flagship cryptocurrency did not crash. In his opinion, Bitcoin was "executed" by the Japanese government bond.
Forced selling turns Bitcoin into traditional risk asset
In a lengthy post on X, Perera maintained that Bitcoin did not suffer a crash as it relates to crypto market volatility. Rather, the dip was triggered by the global financial shift that was set in motion by rising interest rates in Japan.
For clarity, Perera stated that for decades, Japan has kept its interest rate very low, which attracted a lot of investors from around the world. These investors borrowed the Japanese yen cheaply and used it to buy other assets like Bitcoin and U.S. stocks and bonds.
This practice, dubbed the "yen carry trade," is worth between $3.4 trillion and $20 trillion, has been ongoing for a long while. However, current reality indicates that Japanese government bonds have risen sharply, making borrowing more expensive.
With investors unable to continue their" "borrow to invest" practice, many decided to sell their acquired assets, including Bitcoin.
Perera considers the massive sale of the leading cryptocurrency the reason behind Bitcoin’s plunge. He noted that Bitcoin was forced to behave like a risk asset instead of the safe hedge it has been known for. This was because global financial-sector liquidity tightened, forcing Bitcoin to fall.
The analyst highlighted the market’s reaction, including a massive outflow of over $3.45 billion from the Bitcoin exchange-traded fund (ETF). He claims another $646 million in crypto liquidations occurred on the first trading day of December.
Massive outflows highlight global stress beyond crypto
Interestingly, despite this large drop in prices, Bitcoin whales are still accumulating the asset, while miners are reluctant to sell. A total of 375,000 BTC has been purchased by whales even as miners cut sales from 23,000 BTC to less than 4,000 BTC monthly.
This development suggests that long-term holders consider this an opportunity to increase their portfolio. It signals that these sets of market participants are anticipating a recovery.
On the other hand, short-term investors have engaged in panic-selling as they are uncertain of the decision that the Bank of Japan could make on Dec. 18.
Notably, if the Bank of Japan decides to hike rates, Perera claims Bitcoin could plummet to $75,000 even as another analyst considers $40,000. If the bank decides to pause, then Bitcoin might recover to the $100,000 level. As of press time, Bitcoin was changing hands at $86,640.55, which represents a 5.04% decline in the last 24 hours.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team