Bitcoin’s (BTC) imminent death cross, an often foreboding technical signal, seems poised to once again defy its bearish nature, forecasting an unexpected bullish rally akin to its behavior in September 2023.

In the early hours of Wednesday, Shinichi Uchida, the influential governor of the Bank of Japan (BOJ), indicated that the central bank would refrain from increasing borrowing costs amidst market turbulence. This stance diminishes the likelihood of a prolonged unwinding of “yen carry trades” and mitigates risk aversion in volatile assets such as bitcoin.

“Given the severe fluctuations in both domestic and international financial markets, it is essential to maintain the current levels of monetary easing for now,” Uchida articulated in his address to business leaders in Hakodate, Hokkaido.

Consequently, the BOJ’s latest remarks suggest limited downside for cryptocurrencies even as the death cross, identified by the 50-day simple moving average (SMA) dipping below the critical 200-day SMA, approaches.

Following Uchida’s statement, bitcoin maintained its strength, briefly surpassing the $57,300 threshold as the Japanese yen (JPY) weakened to 148 per U.S. dollar (USD) from 145 per USD. Japan’s Nikkei index surged by 4%, signaling a reset in risk appetite, while futures tied to the S&P 500 rose by 0.8%.

“The BOJ has effectively implemented a ‘Yen put,’ propelling the Nikkei, which in turn will drive the Nasdaq and S&P back to their pre-selloff levels,” observed the pseudonymous market analyst Global Macro on X.

The yen carry trade strategy involves leveraging low-interest yen-denominated loans to invest in higher-yielding currencies like the Mexican peso and risk assets. This approach has gained popularity due to Japan’s persistently low interest rates, even as other central banks, such as the Federal Reserve, have increased borrowing costs to combat inflation.

However, last Wednesday marked a significant shift as the Japanese central bank raised rates, abandoning its ultra-easy monetary policy for the first time in 17 years. This hawkish pivot triggered a reversal of carry trades, leading to widespread risk aversion. Consequently, BTC plummeted from $66,000 to $50,000 within five days up to Monday.

“By July 16th, equity markets and various other risky assets peaked. For various reasons, these markets began to sell off. As the sell-off persisted, recent participants in the YCT [yen carry trade] witnessed their assets depreciating, often the primary driver of unwinds. Worse still, the Yen began rallying slowly, initiating the unwind,” explained Andy Constan, CEO of Damped Spring Advisors, in a comprehensive analysis of the yen carry trade on X.

“The unwind of the trade results in inelastic price-moving flow to buy Yen and sell risky assets. The sale of the risky asset also impacts the broader group of leveraged investors who have no yen exposure, leading to margin calls,” Constan added.

This intricate interplay between technical signals and macroeconomic policies continues to challenge market participants, underscoring the dynamic nature of cryptocurrency and global financial markets.