Bitcoin and Ethereum have experienced a rough start to September, with both cryptocurrencies seeing price declines. This bearish sentiment can be attributed to several macroeconomic factors, including the effects of the Yen carry trade. The recent surge of the Yen against the US dollar has led investors to sell riskier assets like Bitcoin and Ethereum to unwind their carry trade positions, which relied on the low-yielding Yen.
Furthermore, hedge fund manager James Lavish pointed out the ongoing impact of the Yen carry trade, noting the drop in the Nikkei 225 and the downward movement of the USD/Yen trading pair. The hawkish statement from the Bank of Japan regarding future rate hikes has added to the fear among traders, forcing them to close their carry trade positions and further increase selling pressure on Bitcoin and Ethereum.
The correlation between Bitcoin, Ethereum, and the US stock market has also played a role in the recent price crashes of the cryptocurrencies. On September 3, more than $1.05 million was wiped out from the stock market, causing panic in the crypto market and prompting a wave of sell-offs for Bitcoin and Ethereum.
This can be seen in the significant outflows from both Spot Bitcoin and Ethereum ETFs on that day. Data from Farside investors revealed that the Spot Bitcoin ETFs and Spot Ethereum ETFs experienced total net outflows of $287.8 million and $47.4 million, respectively.
Given the current bearish outlook for Bitcoin and Ethereum, there is a pressing need for a catalyst that could shift sentiment and provide bullish momentum for the crypto market. The ongoing effects of the Yen carry trade, coupled with the uncertainty surrounding future rate hikes by the Bank of Japan, continue to weigh heavily on the prices of Bitcoin and Ethereum.
Investors and traders will be closely watching for any signs of recovery or positive developments that could potentially reverse the current downward trend in the cryptocurrency market. Until then, the bearish outlook for Bitcoin and Ethereum remains a cause for concern for market participants.
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