Japanese Stock Plunge Fuels Crypto Capitulation Fears

• Japanese stock market crash sparks fears of economic impact on global and cryptocurrency markets.
• Rising interest rates and yen’s weakness led to major selloffs, affecting global market sentiment.
• Bitcoin tumbles amid the Japanese market crash, highlighting the connectivity of global markets.

Crypto analyst Michaël van de Poppe recently sounded the alarm on X (formerly Twitter), highlighting a dramatic 12% drop in Japan’s stock index in a single day – the steepest decline since the market crash of 1987. He expressed concerns about the potential negative impact on the crypto market, suggesting that “capitulation is here” and financial markets may face a slow recovery.

Leading Japanese trading houses like Mitsubishi, Mitsui & Co, Sumitomo, and Marubeni saw their stock prices tumble by about 10%. This downturn follows Friday’s sharp declines, when the Nikkei and TOPIX indices fell by 5% and 6%, respectively.

The market downturn stems from the Bank of Japan’s interest rate hikes, which have disrupted the government bond market. This policy shift has heightened investor concerns about investment risks, leading to a sell-off in the stock market.

Further exacerbating market woes, the Japanese yen has weakened against the U.S. dollar since January 2024, reaching 142.77. Kelvin Tay, regional chief investment officer at UBS Global Wealth Management, noted that the yen’s weakness over the past two years has contributed to the Japanese market’s performance.

Bank of Japan Governor Kazuo Ueda commented that interest rates will likely remain elevated if certain economic factors align with the bank’s expectations. However, this stance introduces increased volatility into the market, as investors grapple with the potential implications of even higher rates.

This comes as the crypto market sees a sharp drop in trading. Bitcoin’s price fell by 13% in the past 24 hours and by 24% in the past week. Bitcoin is now trading at $52,870.