The Japanese yen has crossed the critical 150 mark against the US dollar, a level often seen as a warning sign in global markets. As a traditional “safe haven” currency, the yen typically strengthens when investors become cautious and withdraw from riskier assets.
This latest increase is linked to speculation that the Bank of Japan (BOJ) could raise interest rates in December, following higher-than-expected inflation in Tokyo. This development could pave the way for significant market turbulence in the coming weeks.
Why the Yen is important for crypto?
While Japan is considering tightening monetary policy, the United States is leaning in the opposite direction, with a high likelihood of the Federal Reserve cutting interest rates. If the BOJ raises rates, borrowing in yen will become more expensive, making it harder for investors to finance riskier bets like cryptocurrencies.
A stronger yen often triggers a “risk-off” mentality in markets, leading to an outflow of money from high-risk assets like Bitcoin (BTC). Earlier this year, a similar rise in the yen caused the price of Bitcoin to fall by $20,000. This is largely due to the impact on carry trades, where investors borrow yen at low interest rates to invest in higher-yielding assets. When borrowing in yen becomes expensive, these transactions unwind, hurting markets like crypto.
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XRP steals the show
Amidst this turbulence, XRP has been the star performer. While Bitcoin showed a slight rise to $96,000 and Ethereum (ETH) remained stable, XRP surged more than 5% in the last 24 hours, outpacing major cryptocurrencies. XRP is trading at $1.66, with a 24-hour range of $1.43 to $1.57. With a market capitalization of $89 billion and a trading volume of $6 billion, the 6th largest cryptocurrency holds a market dominance of 2.66%.
XRP’s rally comes as a surprise and reflects growing confidence in the token, particularly due to its clearer regulatory status in some regions. With the arrival of Gensler in January, XRP is ultra optimistic to reach an all-time high.
Mid-Sized Tokens Join the Rally
Other mid-sized tokens, like Algorand (ALGO) and Worldcoin (WLD), also saw big jumps, gaining over 20%. However, the general mood in the crypto market remains cautious, as the yen’s strength signals potential market turmoil.
What lies ahead for crypto?
As December approaches, markets are bracing for a potential conflict between possible rate hikes in Japan and expected rate cuts in the United States. A stronger yen could make borrowing more expensive, forcing investors to unwind risky trades, including those related to crypto. This could trigger massive sell-offs and increased volatility.
