The BOJ (Bank of Japan) has been buying every single Japanese bond that is offered to keep interest rates as low as 2.5%, which puts immense pressure on their currency.
The BOJ has been purchasing bonds instead of holding their own currency, this decreases the value of the Japanese Yen through a lack of conviction.
Therefore, the investors that sell their bonds also want to get rid of their Yen, resulting in a lot of downward pressure on the Yen and the large-scale flocking of investors to other currencies and investments.
In essence, everyone is selling the Yen because of the BOJ’s attempt at halting inflation.
We are currently seeing Japanese investors shorting the very Japanese bonds which the BOJ is buying up. This is because it is impossible for the BOJ to continuously purchases these bonds without imploding the Yen through a lack of government conviction in their own currency.
A chart of the USD/JPY valuation can be seen below (See Fig. 1). The chart represents the strength of the US dollar in comparison to the Japanese Yen. USD has seen relative strength over the Yen for a long time, yet it has only increased since early 2020.
Eventually, the BOJ will have to stop purchasing bonds and begin selling them, which will greatly devalue these bonds, providing a great short opportunity on these bonds.
Through the purchasing of the bonds, the BOJ has maintained ultra-low interest rates to combat the soaring inflation we see globally. Yet, in the long term, this will likely work against the Japanese economy.
The FED came out with another rate hike announcement on the 21st of September in which they announced a rate hike of 75 basis points (0.75%) which puts the current Federal Reserve interest rate, or federal funds rate, at 3% to 3.25%. This is the third consecutive rate hike of 0.75% and the fifth rate hike this year.
The new central bank’s benchmark interest rate, the federal funds rate, at the new range of 3.0% to 3.25% put it at its highest level since 2008.
Unfortunately, even though the 75 basis point hike was expected, meeting expectations was not enough to turn markets around.
Due to the rate hike, Bitcoin saw an 8% dump of its same-day peak. The NASDAQ, US30, and S&P500 also opened their daily session sharply lower after the rate hike was announced. The S&P 500 Index lost a critical support level of 3850.
In his comments, Powell once more stressed what many FED policymakers have previously also stressed, which is that "my colleagues and I are strongly committed to bringing inflation back down to our 2% goal."
It seems as though a relief rally is overdue after the slow bleed the larger market has experienced since the announcement, yet as of right now this is no certainty. We expect a higher probability that we reach lower prices this cycle.
Although, this financial pain will not be felt just by market participants but will likely soon be felt by the global economy to a much greater degree than we are currently witnessing.
Nasdaq introduced a digital asset business function on the 20th of September Tuesday to offer Bitcoin and Ethereum custody services for institutional clients.
This will be another major push into cryptocurrencies for institutions just as seen in July when Blackrock and Coinbase announced their partnership to introduce Blackrock clients to cryptocurrencies.
Nasdaq hired Ira Auerbach, the former global head of Gemini Prime, to lead the new Nasdaq Digital Assets division.
Tal Cohen, Nasdaq’s head of North American markets noted the increasing demand for digital assets as the reason for the adoption, he stated for engaging in digital assets has increased in recent years.”
Even the current large-scale market downturn has not deprived institutions of their interest in Bitcoin and other digital assets.
MicroStrategy, a major and popular Bitcoin holder, purchased an additional 301 BTC between August 2 and September 19 for approximately $6M, according to an SEC filing released on Tuesday 20 September.
MicroStrategy’s recently acquired tokens were acquired at an average price of $19,851.
MicroStrategy now has a bitcoin stash of nearly 130K coins, which were acquired at a total price of about $4 Billion and an average purchase price of about $30,600
Binance, the world's largest cryptocurrency exchange has gained regulatory approval to offer a wider string of services to qualified Dubai-based retail and institutional investors, it said in a blog post on the 20th of September.
Binance has now gained permission to open an account with a domestic bank as well as provide crypto exchange services to consumers and institutions.
The regulatory approval also approved Binance to offer services in payments, remittance, and custody.
Binance has been looking to expand its global footprint for a while now, also announcing they are opening an office in Romania recently.
Now they are also expanding to the United Arab Emirates, an attractive spot for a lot of money. The United Arab Emirates is likely to be an emerging crypto space where a lot of crypto-related firms have pursued regulatory approval.
Bitcoin currently sits at support around 19000. A range has formed since the June lows of 17400~ that have not yet been revisited.
A revisit of these levels would quickly indicate lower with the high-time-frame support sitting at 9-14k.
If no market-affecting news comes out over the weekend or early next week, the lows of the range could serve as market-affecting news support enabling Bitcoin to revisit the 22000 levels.
The markets are still looking very shaky, risk-off is the favored position for investors in the current market conditions.
The QQQ sits at its June lows near $270 after the dump from the 290 level we saw hold as support on the 6th of September (See Fig. 3).
If QQQ breaks below the 270 level we can expect much lower for the QQQ index.
The next support sits near the 2020 Covid panic levels at about $200.
A bounce form the bottom of the lows is a stark possibility if no negative market-affecting news comes out over the weekend or next week.