Bitcoin (BTC) and Ethereum (ETH) have started September on a negative note, with price drops occurring since the start of the month. This negative sentiment surrounding the leading cryptocurrencies and the wider crypto market can be attributed to a number of macroeconomic factors.
Market Still Affected By The Yen Carry Trade
Recent events indicate that Bitcoin and Ethereum continue to feel the repercussions of the withdrawal from the Yen carry trade. The Yen has recently appreciated against the US dollar, indicating that investors are divesting from riskier assets like these cryptocurrencies to close their carry trade positions that took advantage of the low-yielding Yen.
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In an X (formerly Twitter) post, hedge fund manager James Lavish also pointed out that the consequences of the Yen carry trade remain significant. He highlighted that the Nikkei 225 had fallen by 3.7% while the USD/Yen trading pair was trending lower.
Bank of Japan (BOJ) Governor Kazuo Ueda also recently made a hawkish statement indicating that they will continue to raise rates if the economy and prices evolve as projected. This has instilled anxiety among traders, prompting them to close their carry trade positions and exert additional selling pressure on Bitcoin and Ethereum.
Bitcoin and Ethereum experienced significant losses during the market crash on August 5, driven by the BOJ’s decision to raise interest rates for the second time since 2007. Bitcoin fell below $50,000, while Ethereum reached as low as $2,200. Consequently, with the impacts of the Yen carry trade still affecting the market and the BOJ foreshadowing further rate hikes, Bitcoin and Ethereum could face additional price drops.
US Stock Market Crash Contributes To Bitcoin And Ethereum’s Decline
Additionally, the relationship between Bitcoin, Ethereum, and the US stock market has further fueled their price decline since early September. Notably, on September 3, over $1.05 million was wiped from the stock market, triggering fear in the crypto market and resulting in a mass sell-off of Bitcoin and Ethereum.
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This was clearly reflected in the outflows experienced by both Spot Bitcoin and Ethereum ETFs on that day. Data from Farside investors revealed that the Spot Bitcoin ETFs and Spot Ethereum ETFs incurred total outflows of $287.8 million and $47.4 million, respectively.
Given the gloomy outlook for Bitcoin and Ethereum, there is an urgent need for a catalyst that could ignite bullish momentum in the crypto market. Members of the crypto community remain hopeful that the US Federal Reserve will lower interest rates in the upcoming FOMC meeting scheduled for September 17 and 18, as this would provide some relief to the market and help infuse fresh liquidity into Bitcoin and Ethereum.
At the time of this writing, Bitcoin and Ethereum are trading at approximately $57,160 and $2,400, according to data from CoinMarketCap.
Featured image created with Dall.E, chart from Tradingview.com
