With the US FOMC and the Bank of Japan's monetary policy decisions scheduled for the same week, the bitcoin market is expected to become more susceptible to interest-rate trends and movements in the yen. Movements in US long-term interest rates and a strengthening yen could affect the flow of funds.
The bitcoin market is expected to face a major test this week. The US Federal Reserve's Federal Open Market Committee (FOMC) is due to meet on 15-16 September, followed by the Bank of Japan (BOJ) on 18 September, with the size of any rate hikes and the stance on further tightening emerging as key points of focus. Movements in the dollar and yen could spill over into funding conditions in the cryptoasset market.
In the United States, expectations of a rate hike have strengthened against a backdrop of persistently high inflation, and the short-term interest-rate futures market is reportedly pricing in a 0.25 percentage-point hike at this FOMC meeting. If the Chair's press conference or the economic projections signal an inclination toward further rate hikes, investors will need to reassess the interest-rate outlook.
A further BOJ rate hike has also become the central expectation, with the potential to affect markets through the yen carry trade. If the yen strengthens, funding costs could rise, potentially giving investors an incentive to sell their holdings.
This week's developments can be grouped into three scenarios. If rates rise as expected and the tightening stance remains cautious, volatility immediately afterward could remain contained. If tighter-than-expected policy is signaled, however, US long-term interest rates and the yen could rise at the same time, raising concerns that selling pressure on bitcoin will intensify. The third scenario is one in which both central banks hold rates or signal a cautious stance, allowing interest rates and foreign exchange markets to settle and creating room for a rebound in buying.
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