According to recent reports, Japanese investment and consulting firm Metaplanet has decided to adopt bitcoin as a strategic reserve asset due to the country’s mounting debt burden and the subsequent volatility in the yen. Metaplanet’s decision follows the lead of U.S.-listed MicroStrategy, which has acquired multiple billions worth of bitcoin, as reported by Bitcointreasuries.net. The move by Metaplanet is significant as Japan’s fiscal crisis seems to be manifesting itself in the foreign exchange (FX) market, with high government debt levels, extended periods of negative real interest rates, and a weak yen. Metaplanet intends to hold onto bitcoin for the long term to minimize capital gains taxes and issue long-dated yen liabilities to acquire more bitcoin whenever possible. In contrast, some analysts predict that a potentially softer-than-expected U.S. Consumer Price Index (CPI) reading scheduled for Wednesday might push bitcoin prices above $65,000. However, FxPro trader Alex Kuptsikevich warns that a drop below $60,000 could cause a panicked sell-off.
Bitcoin’s price action since hitting record highs in March has been marked by lower highs and lower lows, signaling a shift towards selling among both long- and short-term investors who are currently in profit. As of writing, bitcoin was up 2.34% in the previous 24 hours to $62,543, and the CoinDesk 20 Index (CD20), which gauges broader digital currency market performance, had climbed 1.1%. ETH and SOL, meanwhile, saw more modest gains, trading around $3,000 and $150, respectively. The increase in transaction volumes has also dropped significantly. Some experts believe that declining transaction values indicate a period of consolidation for the market, with bitcoin potentially remaining in a range for the foreseeable future. Downward pressure on prices is linked to miner asset sales and heightened regulatory scrutiny.
The ratio of Japan’s gross debt to GDP now exceeds 254%, the highest among developed countries, according to figures compiled by the International Monetary Fund (IMF). By comparison, the US debt-to-GDP ratio surpassed 123%. The Japanese yen has dropped by half against the US dollar since the beginning of 2021. “As the yen continues to weaken, Bitcoin offers a non-sovereign store of value that has, and may continue, to appreciate against traditional fiat currencies,” Metaplanet explained.
-Omkar Godbole
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