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Simultaneous Central Bank Tightening Emerges as Potential Risk Factor for Bitcoin

Global central banks are tightening monetary policy simultaneously for the first time since 2006, creating macro conditions that could test digital assets.

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Monetary policy across three major central banks is tightening simultaneously for the first time since 2006, according to a market report. Following the European Central Bank’s decision on September 10 to raise its deposit rate to 2.50%, the Federal Reserve and the Bank of Japan are also weighing interest rate decisions this week, with market pricing leaning toward further hikes.

The piece highlights historical parallels from 2006, when coordinated tightening triggered sharp drawdowns across leveraged and higher-risk assets, including double-digit losses in European, Japanese, and emerging market equities. The article likens Bitcoin’s vulnerability to that of emerging markets, noting that a Bank of Japan rate hike in August 2024 previously coincided with a single-day 12% drop in the TOPIX and a 20% drop in Bitcoin.

However, the report points to differences in recent market behavior. Despite the Japanese yen appreciating 3.7% over three sessions, Bitcoin held above $79,000 before trading around $77,871, having already declined 33% over the preceding year. Additionally, US spot Bitcoin ETFs recorded $3.52 billion in net inflows during August, which the article suggests could provide structural support against tightening pressures if inflows persist.

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