Key Points
- Bitcoin and Ethereum are experiencing a significant price drop due to the Japanese yen carry trade and US presidential polls.
- Peter Schiff warns of potential liquidity crisis for Bitcoin and Ethereum ETFs.
Bitcoin and Ethereum are currently in a bear market, influenced by the Japanese yen carry trade and US presidential polls.
Ethereum (ETH) has seen a 22% decrease in the last 24 hours and a 32% decrease in the last week. Bitcoin (BTC) has experienced a 16% and 26% drop respectively.
The Japanese Yen Carry Trade
One of the main factors contributing to the crypto sell-off is the winding down of the Japanese yen carry trade. This follows the decision by Japan’s central bank to increase interest rates by 0.25% last week.
Japan has traditionally maintained low interest rates and was the last central bank to exit negative interest rates. This decision is significant as other central banks are considering rate cuts.
A carry trade occurs when investors borrow from low-interest-rate countries to invest in higher rate countries. For years, borrowing from Japan and investing in the US has been a profitable trade.
The prices of Bitcoin, Ethereum, and other altcoins have fallen due to predictions that Kamala Harris could potentially beat Donald Trump in the upcoming elections. Despite Polymarket giving Trump a 53% chance of winning, Kamala has narrowed his lead in the $500 million bet. PredictIt has Kamala Harris beating Trump.
The ongoing geopolitical issues in the Middle East, rising chances of a US recession, and weak technicals also contribute to the drop in prices.
Peter Schiff’s Warning
Peter Schiff, a well-known crypto bear and gold bull, warns that Bitcoin and Ethereum Exchange Traded Funds could face a liquidity crisis on Monday.
He argues that the ETFs will have to account for the weekend losses and those happening on Monday. If ETF investors sell, then liquidations would overwhelm the spot market.
Schiff has a history of negativity towards Bitcoin and Ethereum, considering them worthless assets. However, historical data shows that these two assets have outperformed gold – Schiff’s preferred asset.
Despite the current sell-off, Bitcoin has risen by 21% this year while gold has increased by 15%. Over the last five years, BTC has risen by 360% while gold has increased by less than 80%.
