Bitcoin price
Although the worst of the crypto bloodbath has blown over, the market remains in retreat.
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For some analysts, this pullback isn’t much of a surprise. In fact, widely-followed veteran trader and crypto commentator Peter Brandt says it’s typical Bitcoin behavior after the “halving.”
(Crypto halving is a deflationary event when the reward for mining new cryptocurrency is cut in half in an attempt to slow supply growth. The last Bitcoin halving took place this past April.)
In an X post on August 5, the analyst said that the “BTC decline since halving is now similar to that of the 2015-2017 halving bull market cycle.”
On July 9, 2016, Bitcoin underwent its second halving when the crypto was trading around $650. Within a month, Bitcoin dropped by almost a third to the $450 mark before launching into one of the biggest bull markets, hitting $20,000 at the end of 2017.
Some analysts, however, beg to differ on the potential causes of Bitcoin’s retreat.
Was Bitcoin simply caught in the yen crossfire?
Although Brandt blames Bitcoin’s recent sell-off on the halving, a chorus of analysts chalks it up to a broader market sell-off, triggered by the so-called carry yen trade.
One of them is Khushboo Khullar, a partner at Lightning Ventures—a firm that invests in crypto-related companies. Khullar argues that the crypto market dipped as a result of a “panic” rush for liquidity.
Matt Hougan, Chief Investment Officer of Bitwise Asset Management, supports Khullar’s view.
In a recent interview with CNBC, he said that Bitcoin was simply caught in the crossfire of a broader sell-off due to the unwinding of the carry yen trade. According to him, “Nothing has changed fundamentally about Bitcoin.”
“We have a global capital market sell-off that impacted the crypto market on a low liquidity weekend, but nothing has changed fundamentally about Bitcoin or about crypto, except that we’re closer to the Fed lowering rates and closer to quantitative easing,” he said.
What is the yen carry trade?
Although the end of the so-called yen carry trade sounds like complex financial jargon, the basic concept is relatively simple to grasp.
In short, a large swath of investors, who had borrowed the Japanese yen at low interest rates to invest in higher-yielding assets, began selling those investments and repaying their yen loans.
This flight was triggered by the Bank of Japan’s quarter-point hike in July, which simply made the carry trade less profitable and riskier.
The result was that investors scrambled in droves to liquidate their assets bought with an increasingly expensive yen, leading to a broad global sell-off in stocks, commodities, and crypto.
