Bitcoin supported by elevated risk-on sentiment as yen weakens against the dollar: analyst

Bitcoin BTC -0.15% 's price has risen by more than 6% since the U.S. Federal Reserve announced a 50 basis-point cut to its Federal Funds rate earlier this week — reaching a high of $63,800 in early Friday trading. The rally comes after the price of bitcoin briefly hit a local bottom of around $57,500 at the beginning of the week.

In addition to the Fed's policy changes, bitcoin has found support from a weaker Japanese yen, according to derivatives trader Gordon Grant. The U.S. dollar has been strengthening against the yen since Monday, providing further upside for bitcoin, which can benefit from this specific currency dynamic. A stronger dollar relative to the yen has historically been supportive of higher-risk assets, as the yen is often used as a funding currency for "risk-on" trades, where investors seek higher returns by borrowing in low-interest currencies like the yen, Grant told The Block.

According to Grant, the yen’s current weakness versus the dollar is playing a crucial role in the market. "The plus 1% strengthening of the dollar uniquely against the yen has accommodated an appreciation in assets like gold, silver and also bitcoin," Grant noted. He added that while bitcoin can act as a "short dollar proxy" — gaining value when the dollar weakens — it also behaves like a high-beta asset, meaning it tends to rise when broader market risk sentiment improves.

The macroeconomic environment of a strengthening dollar and weakening yen was further reinforced on Friday when the Bank of Japan appeared hesitant in its commitment to raise interest rates, opting to keep its policy rate unchanged at 0.25%. In July, the BoJ had indicated that it would continue raising rates if inflation followed its projected path. However, despite expectations of rising Consumer Price Index inflation in 2025 — driven by the "dissipating" impact of government measures aimed at suppressing CPI inflation — the central bank decided to hold rates steady.

The dollar has increased 0.74% to 143.65 yen, close to an overnight high of 143.95.

Mixed views on bitcoin's trajectory following Fed rate cut

Following the Federal Reserve’s recent 50 basis-point rate cut, analysts have divergent opinions on bitcoin’s near- and long-term price prospects. The rate cut, which signals a potential easing of economic conditions, could impact bitcoin significantly in coming weeks and months, but interpretations of its effects vary.

21Shares Crypto Research Strategist Matt Mena stated in an email to The Block that the rate cut could lead to near-term market volatility . "In the short term, the 50 basis-point rate cut could signal to the market that the economy is slowing, hinting at underlying issues that may not yet be apparent. This could unsettle both traditional and digital investors, potentially triggering initial volatility. However, over the long term, bitcoin and other digital assets have historically thrived in low-interest-rate environments," Mena said.

Meanwhile, BRN analyst Valentin Fournier provided a more cautious longer-term outlook. "Technical indicators suggest that bitcoin's upward momentum may be nearing its peak. The price is approaching the upper Bollinger Bands, and the Stochastic RSI is signaling a potential trend reversal. For now, we recommend maintaining low exposure, with reinvestment only considered around $56,000 and lower," Fournier said in an email sent to The Block.