Bitcoin (BTC) has experienced a significant drop again, falling below $64,000, driven by market overconditions and an unexpected election in Japan.
- Bitcoin falls below $64,000 after election in Japan
- Strong drop in Bitcoin and Nikkei due to new Japanese Prime Minister
- Bitcoin and Japanese financial markets decline due to electoral surprise
After a 14% increase following the 50 basis point rate cut by the U.S. Federal Reserve, the market was in a vulnerable position for a massive sell-off. This event was triggered by the recent election of Japan’s new Prime Minister, Shigeru Ishiba, who is believed to support the normalization of the Bank of Japan’s (BOJ) monetary policy.
Impact of the election on the Japanese financial market
Following his election, Ishiba called for snap elections at the end of October, which generated unease in the markets. It’s worth noting that the BOJ’s interest rate hike at the end of July caused global panic, with the yen’s decline and a drastic drop in Bitcoin’s price from $70,000 to below $50,000 in just a few days.
This episode prompted the BOJ to intervene, assuring that no further rate increases would occur in 2024. However, Ishiba’s election renewed fears, causing a rise in the yen and a rapid 5% drop in the Nikkei, which also affected Bitcoin, bringing it down from $66,000 to $63,300.
European stocks are down about 1% at noon, and U.S. stock index futures show only modest losses.
Market outlook for Bitcoin
Before this pullback, Bitcoin had enjoyed a bullish run driven by the Fed’s decision to cut rates in September, as well as monetary stimulus from China. However, recent indicators suggest that the Bitcoin market was overbought, increasing its vulnerability.
CoinDesk, through its analyst James Van Straten, noted that the perpetual funding rates for Bitcoin futures reached levels similar to those observed before the drops in July and August.
What to expect this week
This week marks the beginning of a new month, bringing a series of key economic reports and comments from central banks.
Later on Monday, Fed Chair Jerome Powell may comment on the economic and monetary policy outlook in a speech at the annual meeting of the National Association for Business Economics.
On Tuesday and Thursday, the U.S. manufacturing and services reports from the Institute for Supply Management (ISM) will be released, with the main event being the September jobs report on Friday.
The data could significantly influence the Fed’s rate decision at its next policy meeting in early November.
At this time, markets are pricing in approximately a two-thirds probability of a 25 basis point rate cut by the Fed, according to the CME FedWatch. It was the Fed’s somewhat surprising move to reduce rates by 50 points in its September meeting that triggered this recent bullish movement.