Bitcoin Declines as Stock Markets React to Bank of Japan Rate Increase

Bitcoin begins the week on a downturn, adversely affected by comments from the Bank of Japan and a significant sell-off in the equity markets.

Market Overview

The price of Bitcoin (BTC) has decreased by 6.5% over the past week, continuing its slide on September 3, corresponding with a 1.2% drop in the DOW. The S&P 500 and Nasdaq Composite experienced declines of 1.3% and 1.8%, respectively. Traders link this downward trend to statements from the Bank of Japan (BoJ), which have reignited concerns about a possible recession affecting the global economy.

Bloomberg reports that market prices fell further on September 3 as the BoJ indicated potential for more interest rate increases.

In a report submitted to a government panel led by outgoing Prime Minister Fumio Kishida, BoJ Governor Kazuo Ueda outlined the central bank’s policy decisions from July and emphasized that interest rates will continue to rise if economic indicators and price levels align with expectations.

Following these comments, the yen saw an uptick against the US dollar, with the USD/JPY exchange rate temporarily declining from a high of 147.2 on September 2 to 145.1. Bitcoin (BTC) plummeted by $1,700 within two hours post-Wall Street opening on September 3, reaching an intraday low of $57,556, according to data from Cointelegraph Markets Pro and TradingView.

This situation brought to mind the BoJ’s earlier rate adjustment in late July, which had led to a retreat of yen carry trades and negatively impacted risk assets, including Bitcoin.

The unwinding of yen carry trades has been linked to market turbulence, previously contributing to Bitcoin’s drop to $49,577 on August 5.

Declining Retail Demand for Bitcoin

Since its peak at $73,835, Bitcoin has struggled to attract retail investors, showing a significant reduction in demand.

“The interest for $BTC among retail traders is nearly nonexistent,” noted crypto influencer Lark Davis in an August 31 post, referencing the monthly demand variations for Bitcoin. His analysis indicates that interest from retail investors has remained tepid since May 2024, signaling diminished engagement with BTC.

“Everyone wanted to buy Bitcoin at $73K, but nobody wants to buy it at $59K.” – Lark Davis

Supporting this concern, Google Trends data reveals that search interest for the term “Bitcoin” reached a 12-month low in August. Since June 2021, worldwide searches have consistently stayed below 50 out of 100, with only a minor spike to 40 in March 2024.

Typically, major price rallies are fueled by increasing retail investor demand, often spurred by speculative trading and the fear of missing out. Although institutional investors often engage in larger transactions, many analysts believe substantial price increases for BTC cannot commence without a revival in retail interest.

Bitcoin’s Valuation Despite Current Downtrend

Despite experiencing fluctuations since its all-time high on March 14, Bitcoin appears to be stabilizing within a wide range between $50,000 and $70,000. However, according to on-chain analyst Root, Bitcoin is considered to be fairly valued.

Root defines this fair value based on the underlying economic fundamentals of the cryptocurrency.

The analysis indicates that Bitcoin’s current price closely aligns with its intrinsic value.

VanEck, a wealth management firm based in New York, expresses optimism for Bitcoin’s trajectory, forecasting potential price targets of $2.9 million by 2050, with an optimistic scenario suggesting a target of $52.38 million.

This content is for informational purposes only and does not constitute investment advice. All investment and trading activities carry risks, and individuals should conduct their own independent research before making any decisions.