Cryptocurrency Information Bureau News: What impact will the Bank of Japan's interest rate hike have on the cryptocurrency market? A super-easy-to-understand explanation for beginners on what will happen with the double impact of US deregulation. Learn what's going on behind the scenes of the market and make the news even more interesting! #BankofJapanInterestRateHike #Cryptocurrency #Web3Explanation
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👋 Do you find Web3 News difficult? Today, I'll explain it in a super easy-to-understand way.
When watching the cryptocurrency news, sudden market fluctuations can leave you wondering, "What's going on?" This time, we'll explain, in an easy-to-understand manner for beginners, how the Bank of Japan's interest rate hike will affect the cryptocurrency market. Ultimately, the key point is the possibility of a change in market liquidity (ease of money flow). Understanding this will make the news even more interesting.
🔰 Difficulty: Ultra Beginner
🎯 Target: People who are new to Web3 / People who are interested in technology trends
What will happen to cryptocurrencies if the Bank of Japan raises interest rates? A simple guide for beginners
💡 Key points in 3 seconds
- The Bank of Japan's interest rate hike could change the flow of money in the cryptocurrency market.
- Deregulation in the US will strengthen the ties between banking and traditional finance and cryptocurrencies
- It is important to understand the reasons for price fluctuations and study with an awareness of risks
📖 Table of Contents
What was the problem in the first place?
The world of virtual currencies is constantly influenced by the movement of money around the world. For example, when borrowing money from a bank, if the interest rate (fees for borrowing money) is low, it becomes easier for people to borrow money, and investment increases. This is called "carry trade," and many people borrowed money with low interest rates, such as the Japanese yen, and invested it in virtual currencies that were likely to be profitable.
But now, the Bank of Japan (BoJ) is0.5% to 0.75%This is the highest level in decades and could change the flow of money around the world. Why is this a problem? Higher interest rates make it less easy to borrow money, which leads to money being withdrawn from risky assets like cryptocurrencies. For example, if the US central bank raises interest rates in 2022, the price of Bitcoin could rise to$6 to under $2Remember when the total market value fell to2.87 trillion dollarsAnd even small changes can have big effects.
In addition, there has been an increase in selling on Asian exchanges, forcing miners to sell their Bitcoin.8%The fact that it's falling is proof that everyone is in a difficult situation. When these problems overlap, the market's "liquidity" (the ease with which money flows) suddenly worsens, causing prices to fluctuate greatly. In everyday terms, it's like when the roads get congested on a rainy day and cars can't move. When the flow of money stops, everyone is in trouble.
What's so great about this technology?
What's amazing about this news is that two major changes are occurring simultaneously. One is the Bank of Japan's interest rate hike, and the other is deregulation in the United States. First, a quick look at how interest rate hikes work. When a central bank raises interest rates, the "carry trade"—borrowing yen and investing it in other assets—is reversed. In other words, more people are selling virtual currencies like Bitcoin in order to repay the money they borrowed cheaply. This could narrow market liquidity and lead to a drop in prices.
Meanwhile, the US Securities and Exchange Commission's (SEC) approval of the DTCC (Deutsche Telekom Clearing Corporation) blockchain pilot is major news, furthering the convergence of traditional finance (TradFi) and virtual currencies. Blockchain is a shared ledger-like technology that tokenizes (digitizes) US government bonds (over $27 trillion). This makes transactions faster and more secure. For example, smart contracts (automated contract programs) can be used to complete transactions instantly. The Federal Reserve's (Fed) relaxation of Bitcoin storage and trading restrictions for banks also makes it easier for institutional investors to enter the market.
To break down the technical terminology, ETFs (exchange-traded funds) are products that allow you to trade virtual currencies like stocks, and they are already$ 57 millionThere is an influx of blockchain technology. This may help stabilize the market. However, what's impressive from a technical standpoint is that it uses permissioned Ethereum (a derivative of Ethereum) to achieve consensus quickly (within 2 seconds). This is more efficient than the traditional Proof of Work (PoW, a method in which everyone competes to calculate).
| Item | Traditional Financial System | Cryptocurrency and Blockchain Integration |
|---|---|---|
| Transaction Speed | It takes several days (there is a T+1 risk) | Completed in seconds (using smart contracts) |
| cost | High fees | Low cost and high transparency |
| Accessibility | Only through banks | Anyone can participate (subject to regulations) |
| risk | Centralization Errors | Decentralized but price fluctuations are large |
This comparison shows the potential for blockchain to make finance faster and more accessible—for example, bank transfers take days, whereas blockchain is instant—but keep in mind the risk of price volatility.
How will your life change?
Let's consider three scenarios to see how these changes will affect our daily lives. First, for ordinary people who are not investors, an interest rate hike means that the value of money will change. For example, if the yen becomes stronger when traveling abroad, international remittances using cryptocurrencies may become cheaper. However, if the market fluctuates, the prices of apps that use cryptocurrencies (e.g., in-game NFTs, digital ownership) may fluctuate, making it harder to enjoy them.
The second is a change in banking. If the Federal Reserve's deregulation makes it easier for regular banks to handle Bitcoin, we may be able to buy virtual currency through banking apps in the future. In everyday terms, it would be like managing digital assets directly from your savings account. This would be convenient, but bank security would be important.
The third point is the impact on jobs and businesses. If the DTCC pilot is successful, large assets like government bonds could be moved to the blockchain. This could allow companies to raise capital faster and increase the number of startups. If you're an entrepreneur, DeFi (decentralized finance, a system for lending and borrowing without banks) could make it easier to raise capital at low cost. However, everything depends on regulation and carries risks.
To see for yourself
It's important not to take the news at face value, but to verify it yourself. Gather information from official websites and trusted sources. For example, check official announcements from the Bank of Japan or check the details on the SEC website. Practice DYOR (Do Your Own Research). Beware of scams! Fake news and phishing (scams that steal information from fake websites) related to cryptocurrencies are rampant. Always check URLs and use only trusted apps.
What happens next?
It will be interesting to see whether the Bank of Japan's decision will stabilize the market or lead to further volatility. Looking at it positively, if virtual currencies are integrated with traditional finance, as in the United States where deregulation is progressing, it will become a safer and easier-to-use technology. For example, Layer-2 (an extension of Ethereum, a mechanism that makes transactions faster and cheaper) may become widespread and be used for everyday payments.
However, there are some points to be aware of. There is a high risk of price fluctuations, and changes in regulations could limit the technology. Security issues (hacking) and environmental impacts (power consumption of PoW) cannot be ignored. We recommend keeping a balanced perspective and enjoying technological advancements.
My Feelings, Then and Now
Today, I explained for beginners how the Bank of Japan's interest rate hike and US regulatory changes will affect cryptocurrencies. Hopefully, this gives you some insight into the background of the news. Understanding the technology will help you make smarter decisions. Again, this is informational, and investment decisions are your own responsibility. Cryptocurrencies involve risk, so please study them carefully.
👨💻 Author: SnowJon, Web3 and AI researcher
Based on the knowledge he gained from the University of Tokyo's Blockchain Innovation course, he provides easy-to-understand explanations of Web3 and AI technology, focusing on translating complex technologies into everyday life.
*This article was written with the assistance of AI, but the content was checked and final editing was done by the author.
References/Information sources
- Bank of Japan Official Website
- Official website of the U.S. Securities and Exchange Commission (SEC)
- DTCC official website
- Yahoo Finance: Bitcoin Traders Brace for Bank of Japan Rate Hike
- CNBC: Bank of Japan Rate Hike Article