The Fed and the Bank of Japan: How Central Bank Decisions Will Rewrite the Script for the Crypto Market
The new trading week began with a noticeable decline in oil prices. Tensions in the Middle East are gradually easing, which immediately impacted Brent and WTI quotes — they headed downward. However, unlike the commodity sector, stock futures are showing confident growth. The yield on US Treasury bonds, which had previously surged, has started to decline, and the dollar exchange rate is falling. The market is clearly reassessing its short-term inflation expectations ahead of key decisions by global central banks.
Digital assets, in turn, responded to this shift in sentiment with a powerful rally. Bitcoin and Ethereum showed significant gains over the past weekend. The volume of liquidations in the market exceeded $330 million, with the bulk coming from the closing of short positions — a clear sign that bears were caught off guard.
Key events of the week: Bank of Japan and the Fed
The main triggers for global markets this week will be the meetings of the Bank of Japan and the US Federal Reserve. In my assessment, the Japanese regulator will continue its course toward normalizing monetary policy, which is already causing nervousness in carry trade markets. On the other hand, the Fed is highly likely to keep the interest rate at its current level. It is now critically important for investors to pick up on signals from regulators: whether they will maintain their previous hawkish rhetoric or hint at easing inflationary pressure.
Undoubtedly, the main benchmark for all market participants — from stocks to cryptocurrencies — remains the dynamics of US Treasury bond yields. It is expectations regarding rates and liquidity that have recently been determining the direction of capital flows. The central bank decisions this week will give us a much clearer understanding of whether the current risk reassessment will continue until the end of June or whether markets will take a pause.
My professional opinion: The market is pricing in a "dovish" pause from the Fed, which is positive for risk assets. However, if the Bank of Japan tightens policy more than expected, we could see a sharp pullback — the yen will strengthen, and carry trades will begin to unwind, temporarily hitting liquidity and cryptocurrencies. Be prepared for increased volatility in the second half of the week.