On Monday, Bitcoin (BTC) experienced a slight premium in Japanese markets amid volatile yen trading due to a holiday-thinned session.
As the yen fluctuated wildly, some observed that this increased foreign exchange (FX) volatility might impact the crypto market.
Bitcoin traded with a slight premium on Japanese exchanges on Monday, as the Japanese yen (JPY) initially slid to a 34-year low against the U.S. dollar before rebounding with signs of central bank intervention. The BTC/JPY pair on the Japanese crypto exchange bitFlyer traded at a 0.2% premium compared to the BTC/USD pair on the Nasdaq-listed Coinbase, according to TradingView data. CoinDesk reached out to bitFlyer for comment, but had not received a response at the time of writing.
Bitcoin’s premium in yen terms has been noticeable in recent weeks. Early this month, the premium reached 1.49%, the highest since March 2020, indicating that traders were shifting towards alternative assets to navigate yen volatility.
“Currently, the bitcoin premium on Japanese markets is around 0.3%-0.4%, down from over 1% in mid-April and a yearly high of 1.7% in mid-March. However, this could change. Overall, FX volatility is on the rise due to diverging monetary policy expectations and geopolitical factors, which could affect the crypto market,” said Dessislava Aubert, an analyst at Paris-based Kaiko, in a statement to CoinDesk.
The yen’s dramatic fluctuations during Monday’s trading session, initially falling to 160 pips per U.S. dollar and then rebounding 500 pips to 155 pips per USD, led to speculation about Bank of Japan (BOJ) intervention. Local media neither confirmed nor denied the rumored BOJ action, but noted that low liquidity and caution about possible central bank intervention could have triggered the sudden surge in the yen.
The yen has been losing favor among investors as Japan’s high public debt hampers the Bank of Japan’s ability to match U.S. interest rates. This ongoing fiscal crisis in Japan has been reflected in the FX market.
Meanwhile, the Federal Reserve (Fed) is set to hold a policy meeting this week, where it is expected to emphasize the need to maintain interest rates at 5.25% for an extended period due to persistent inflation.
Last week, the BOJ held its benchmark interest rate at 0-0.1%, having raised it slightly earlier in the year. The central bank’s ultra-loose monetary policy during the Fed’s tightening cycle in 2022-2023 has encouraged traders to sell off the yen.