The global interest rate cut cycle has begun, and the Crypto Assets market is about to welcome spring.

In the current macroeconomic situation, investment strategies in Crypto Assets are facing new opportunities. As some central banks begin to cut interest rates, the Crypto Assets market is expected to recover from the summer slump, signaling that a new bull market is about to arrive. Since 2009, Bitcoin and other Crypto Assets have been powerful tools against the traditional financial system. In the context of changes in the current macro environment, actively going long on Bitcoin and other Crypto Assets may be a wise choice, as the market is likely to experience a strong rebound.

The USD-JPY exchange rate is one of the important indicators for observing the trends in the macroeconomy. One possible solution to strengthen the yen is for the Federal Reserve to exchange newly printed dollars for yen with the Bank of Japan in unlimited amounts. This would enable the Bank of Japan to provide ample dollar funding to the Japanese Treasury for purchasing yen in the global foreign exchange market.

Although this approach may be effective, the central banks of the G7 countries currently seem to have chosen another strategy: to make the market believe that the interest rate differentials between the yen and the dollar, euro, pound, and Canadian dollar will narrow over time. If the market agrees with this expectation, it will buy yen and sell other currencies, thereby strengthening the yen.

To achieve this goal, the central banks of the G7 countries (the Federal Reserve, the European Central Bank, the Bank of Canada, and the Bank of England) must lower their high policy interest rates. Notably, the Bank of Japan's policy interest rate is only 0.1%, while the rates in other countries are around 4-5%. The interest rate differentials between currencies are a fundamental factor influencing exchange rates.

From March 2020 to early 2022, major economies around the world were implementing loose monetary policies. However, when the inflation issue became so severe that the elite could no longer ignore it, the central banks of the G7 countries, except for the Bank of Japan, began to actively raise interest rates.

The reason why the Bank of Japan cannot raise interest rates is that it holds over 50% of Japanese government bonds. When interest rates fall, bond prices rise, making the Bank of Japan's balance sheet appear healthier. However, if the Bank of Japan allows interest rates to rise, bond prices will fall, and this highly leveraged central bank will suffer significant losses.

Therefore, if the goal is to narrow the interest rate spread, the only option is for central banks with higher policy interest rates to lower their rates. According to traditional central bank theory, it is reasonable to cut interest rates when inflation is below the target. However, the current inflation rates in the G7 countries are generally above the 2% target level.

Nevertheless, this week the Bank of Canada and the European Central Bank still chose to cut interest rates despite inflation being above target. This move seems counterintuitive, as there is currently no apparent financial turmoil that requires a more accommodative monetary policy to address.

This abnormal behavior may be a response to the problem of a weak yen. If the yen cannot be strengthened, China may release a depreciated renminbi to match the low-priced yen of its main export competitor, Japan. This situation could lead to the selling off of U.S. Treasury bonds, threatening the U.S.-led global financial system.

The upcoming G7 meeting may have a significant impact on the market. Will they announce some coordinated currency or bond market operations to strengthen the yen? Or will they remain silent but agree that other central banks, apart from the Bank of Japan, should begin to cut interest rates? The answers to these questions will be highlighted in the post-meeting communiqué.

Whether the Federal Reserve will begin to cut interest rates close to the time of the November U.S. presidential election is an important question. Generally, the Federal Reserve does not change its policy as elections approach. However, considering the current unique political environment, we need to maintain flexible thinking.

If the Federal Reserve unexpectedly cuts interest rates at the upcoming June meeting, the USD-JPY exchange rate may fall significantly, and the yen will strengthen. However, given the current political climate and polling results, the likelihood of the Fed cutting rates seems low. My basic expectation is that the Federal Reserve will maintain its existing policy.

In the coming weeks, monetary policy meetings of central banks around the world will be held one after another. Although the market generally expects that the policy rates of most central banks will remain unchanged, given the rate cuts by the Bank of Canada and the European Central Bank, we cannot rule out the possibility of more unexpected rate cut decisions.

This week's interest rate cuts by the Bank of Canada and the European Central Bank may mark the beginning of a shift in global monetary policy, which is expected to help the Crypto Assets market emerge from its slump. Although this is not the fundamental scenario I previously anticipated, it now seems that a Crypto Assets bull market may arrive sooner than expected.

In this macro environment, going long on Bitcoin and other crypto assets may be a wise move. For projects considering issuing tokens, now might be a good time. For investors holding stablecoins and seeking high yields, it may be worth considering reallocating some funds into promising crypto assets. Although the market is always filled with uncertainty, the current macro environment seems to be creating conditions for a new round of increases in the crypto assets market.