What is the reason for today’s decline in Bitcoin? Here is the Answer and the Latest Situation!

Shigeru Ishiba’s election as Japan’s new Prime Minister on Monday led to Japanese stocks and Bitcoin (BTC) This led to volatility in financial markets as risky assets, including

According to Analysts, the Reason for the Fall in Bitcoin is the Increased Probability of Japan’s Interest Rate Increase

The election of Shigeru Ishiba as Japan’s new Prime Minister on Monday sent volatility in financial markets, with risky assets including Japanese stocks and Bitcoin taking a hit. Bitcoin, which reached a high level of $66,300 over the weekend, fell to around $63,500, a 4% decline after the announcement.

The market reaction stems from Ishiba’s past support for hawkish monetary policies, including raising interest rates through the Bank of Japan (BoJ) and advocating for higher corporate taxes. This policy stance has fueled fears of another potential interest rate hike that could further plunge the already volatile crypto market.

In early July, the Bank of Japan raised interest rates for the second time this year, wiping billions of dollars from the cryptocurrency market. Investors are now worried that another raise under Ishiba’s leadership could have an even more significant impact.

However, not everyone shares this concern. Steven Glass, an analyst at Pella Funds Management in Sydney, told CNBC’s Squawk Box that Ishiba’s election is unlikely to result in further rate hikes. “It is unlikely that the BOJ will increase policy rates,” Glass said, citing the fragility of the Japanese economy and the insufficient inflation levels to require such a move.

The election follows a strong September for Bitcoin, which saw a 20% rally amid more favorable global financial conditions. The FED’s 0.5% interest rate cut and China’s monetary stimulus supported riskier assets such as cryptocurrencies.

Still, analysts warn that Japan’s economic policies, especially those with new influences, could have far-reaching consequences for the crypto market. BitMEX founder Arthur Hayes has previously emphasized that the yen is the “most important macro variable” for cryptocurrencies, tech stocks and US debt markets.

In May, Hayes argued that Japan’s weak yen could trigger a crypto rally, sending Bitcoin to new highs. But the Bank of Japan’s decision to raise interest rates in July further strengthened the situation, leading to a global sell-off in stocks and Bitcoin falling below $50,000 for the first time since January.

*This is not investment advice.