The latest moves in crypto markets, in context March 30, 2022 Supported by |
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Good morning, and welcome to First Mover. Here’s what’s happening this morning: Market Moves: Bitcoin trades at a discount in the JPY markets. Derivatives Insight: Open interest in AAVE soars.Today’s newsletter was edited by Omkar Godbole and produced by Parikshit Mishra. And check out the CoinDesk TV show “First Mover,” hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Damanick Dantes, markets reporter, CoinDeskCharlotte Principato, financial services analyst, Morning ConsultRep. Stephen Lynch, Massachusetts (D) |
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While the Japanese yen's recent slide has scared the country's energy buyers, the investor community seems impervious to the heightened fiat currency volatility. The yen depreciated 8% to 125 per U.S. dollar in three weeks to March 28 before recovering to 121 per dollar early today – still down 6% for the month and the year. Several analysts are worried that the Federal Reserve's plans to deliver rapid-fire rate hikes and the Bank of Japan's persistent easing bias could see the yen weakening to 150 per dollar within 12 months. Even so, bitcoin is trading at a discount in the Japanese yen market, according to data tracked by Paris-based Kaiko Research. The spread between the BTC/USD and BTC/JPY markets flipped negative early this month as the yen started losing ground. In other words, bitcoin doesn't seem to be drawing haven bids from investors exposed to the slide in the Japanese yen. The cryptocurrency is widely perceived as a gold-like store of value asset and traded at a 6% premium on Binance’s Ukrainian hryvnia (UAH) market following Russia's invasion in February. According to Daisuke Kobayashi, strategic financial officer at Tokyo-based fintech software and IT business solution provider xWIN, the widespread belief that a weak yen is a boon for stock markets seems to be keeping haven demand for bitcoin under check. "Only a few Japanese investors have noticed [the yen fall]," Kobayashi told CoinDesk in a LinkedIn chat. "There is also a welcoming mood, which is wrong, as they believe that a weaker yen will raise the price of stocks." |
Bitcoin trades at a discount in JPY markets (Kaiko.) |
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Historically, there has been a near-linear relationship between the yen and Japanese stocks. BOJ's governor Haruhiko Kuroda told parliament last week, "there is no change to my view that a weak yen is generally positive for Japan’s economy." Thus, the absence of premium in the BTC/JPY market is not surprising – more so as the yen is a G-7 currency and a far stronger unit than Ukraine's hryvnia, considering it is backed by forex reserves of $1.38 trillion, the second-largest in the world. Further, according to Kobayashi, crypto forms a small portion of an average Japanese investor's portfolio. "The 1.18 trillion yen ($9.8 billion) worth of cryptocurrency held by users at Japanese exchanges as of January was also a fraction of Coinbase's $278 billion in December," NIKKEI Asia's article dated March 22 said. That said, crypto adoption may boom, not just in Japan but in Asia and other parts of the world, if the rising bond yields force the Bank of Japan (BOJ) to abandon its six-year-old yield curve control program, under which it allows the 10-year government bond yields to move 25 bps (0.25 percentage point) around the 0% target. The BOJ has led the Fed and other advanced nation central banks in implementing extra ordinary measures by a decade or so. Besides, the curve control program running since 2016 has indirectly kept yields under control in Asia and in advanced nations. Hence, if the Japanese central bank abandons curve control, there could be a sharp rise in yields and risk aversion. Perhaps, markets may take it as a hint of an eventual failure of unconventional tools across the globe. The 10-year Japanese yield has recently challenged the 0.25% mark several times, thanks to inflation fears and rising global yields. The two-year German yield has turned positive for the first time since 2015. That has forced the BOJ to step up purchases. Early Monday, the BOJ said it would buy unlimited bonds for four days to ensure the yield remains under 0.25%. The central bank can keep printing money for decades, but will the market react as intended? The law of diminishing marginal utility seems to be catching up, as evident from the upticks in bond yields. Investors can no longer ignore the developments in Japan. |
USD/JPY versus MSCI Japan index/MSCI World Index (Bloomberg.) |
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The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours: |
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| Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges. |
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Open Interest in AAVE Soars By Omkar Godbole |
Data tracked by IntoTheBlock shows the dollar value locked in the number of open positions in perpetual futures contracts tied to AAVE, the native token of Aave protocol, has risen to a multi-month high of $220.6 million. Daily volume in the perpetuals market has jumped to $1.34 billion, the highest since Oct. 27. The combination of rising open interest along with a sustained uptick in the token's price suggests a considerable amount of longs are being opened, IntoTheBlock said in its Telegram channel. AAVE was trading near $235 at press time, representing a 17% gain on the day. The token has doubled in two weeks. |
Open interest in AAVE (IntoTheBlock.) |
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Introducing Market Wrap, our daily newsletter that explains what happened today in the crypto markets — and why. Sign up to get the first edition in your inbox on April 4. |
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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. |
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