Bitcoin (BTC) and Ethereum (ETH) have begun September on a downtrend, experiencing price declines since the month’s start. This negative sentiment toward these leading cryptocurrencies, as well as the broader crypto market, is influenced by multiple macroeconomic factors.
Recent indicators suggest Bitcoin and Ethereum are still reeling from the abandonment of the Yen carry trade. A recent surge in the Yen against the US dollar implies that investors are continuing to sell higher-risk assets like cryptocurrencies to unwind their carry trade positions, initially built using the low-yielding Yen.
Hedge fund manager James Lavish noted in an X (formerly Twitter) post that the Yen carry trade effects remain significant. He highlighted a 3.7% drop in the Nikkei 225 index, coupled with a declining USD/Yen trading pair.
In recent developments, Kazuo Ueda of the Bank of Japan (BOJ) made a hawkish statement, indicating a willingness to hike rates if the economy and prices perform as anticipated. This has incited fear among traders, leading them to close their carry trade positions and adding further selling pressure on Bitcoin and Ethereum.
Bitcoin and Ethereum faced major losses during the August 5 market crash, precipitated by the BOJ’s rate hike decision—the second since 2007. Bitcoin fell below $50,000, while Ethereum dropped to as low as $2,200. With the lingering effects of the Yen carry trade and potential future rate hikes, Bitcoin and Ethereum are at risk of further price declines.
Additionally, Bitcoin and Ethereum’s price drop correlates with a downturn in the US stock market since September began. On September 3, over $1.05 million was wiped from the stock market, igniting fears in the crypto market and triggering a wave of sell-offs for Bitcoin and Ethereum.
This sentiment was mirrored in the significant outflows from both Spot Bitcoin and Ethereum ETFs on that day. Data from Farside investors reported total net outflows of $287.8 million for Spot Bitcoin ETFs and $47.4 million for Spot Ethereum ETFs.
Given this bearish outlook, there is an urgent need for a catalyst to spark bullish momentum in the crypto market. The crypto community is hopeful that the US Federal Reserve will cut interest rates at the upcoming FOMC meeting between September 17 and 18, which could inject much-needed liquidity into Bitcoin and Ethereum.
At the time of writing, Bitcoin and Ethereum are trading at approximately $57,160 and $2,400, according to data from CoinMarketCap.
