Bitcoin is struggling to rally out of another drawdown amid investor concerns about a hawkish Bank of Japan.
BTCUSD – Daily Chart
The price of BTCUSD is trying to find buyers around $87,500, but a failure there could push it to new lows below $80,000.
Friday brings a monetary policy announcement from the BOJ, with analysts expecting the bank to hike rates to their highest level since 1995. However, the big event could be the press conference at 1:30 pm HKT. Traders are on alert for a faster path to higher rates in Japan that could end the so-called carry trade.
Investors have often borrowed in Japanese yen and funded trades with higher-yielding currencies like the AUD or GBP. There are now fears that a faster rate hike plan could remove speculative liquidity from markets, including cryptocurrencies. A surprisingly low U.S. inflation print also hit Bitcoin.
The November release of the Consumer Price Index printed one of its most significant monthly declines since 2023. U.S. inflation is now at its lowest level since March 2021, raising recession fears.
“The all items index rose 2.7 percent for the 12 months ending November, after rising 3.0 percent over the 12 months ending September,” an official statement from the BLS said.
Meanwhile, the CEO of stablecoin Tether, Paolo Ardoino, raised concerns about how a potential AI bubble could affect Bitcoin by 2026.
“That is the so-called AI bubble, this concern about the fact that AI companies are spending too much money in AI infrastructure and data centers and trying to build a gazillion gigawatts of power and installing GPUs,” Ardoino said.
Aside from AI bubble risks, Ardoino sees less risk to Bitcoin’s performance next year, given growing adoption by pension funds and governments.
“So I would imagine that sharp corrections of 80%, like we saw in 2022 or early 2018, might not be the case anymore,” he predicted.
Despite the positive tone, bitcoin still needs to find buyers after a recent slump, and traders are looking first to the Bank of Japan’s comments on Friday.
