TLDR The Bank of Japan is expected to raise interest rates by 25 basis points to 0.75% on December 19, which would be the highest level in roughly 30 years. TheTLDR The Bank of Japan is expected to raise interest rates by 25 basis points to 0.75% on December 19, which would be the highest level in roughly 30 years. The

Bitcoin (BTC) Price: Could Japan’s Central Bank Trigger Another Crash?

2025/12/14 18:25

TLDR

  • The Bank of Japan is expected to raise interest rates by 25 basis points to 0.75% on December 19, which would be the highest level in roughly 30 years.
  • The last BOJ rate hike in July 2024 caused Bitcoin to crash from $65,000 to $50,000 within days due to a yen carry trade unwind.
  • Bitcoin is currently showing weak demand despite price discounts, with investors hesitant to buy at recent levels.
  • Analysts warn a rate hike could trigger liquidity to flow out of risk-on assets like Bitcoin and stocks, potentially pushing BTC down to $75,000 or lower.
  • This time may be different as speculators already hold net long positions in the yen and Japanese bond yields have already risen throughout 2024.

Bitcoin price faces a potential test on December 19 when the Bank of Japan announces its interest rate decision. The central bank is expected to raise rates by 25 basis points to 0.75% from 0.50%, according to reports from Nikkei.

Bitcoin (BTC) PriceBitcoin (BTC) Price

This would mark Japan’s highest interest rate level in approximately 30 years. The decision comes at a time when Bitcoin has struggled to build strong upward momentum after November lows.

The cryptocurrency market is paying close attention because the last BOJ rate hike caused major disruption. On July 31, 2024, when the bank lifted rates to 0.5%, Bitcoin crashed from around $65,000 to $50,000 in early August.

The crash happened because of the yen carry trade. For decades, investors borrowed yen at ultra-low or negative rates to buy higher-return assets like stocks and cryptocurrencies. When rates increased, these investors were forced to exit their positions.

Market activity currently shows weak demand for Bitcoin. Investors appear hesitant to buy back at recent price levels. This hesitation suggests smart money may be waiting for better entry points.

The Yen Carry Trade Connection

The yen carry trade plays a crucial role in global markets. Hedge funds and trading desks have used borrowed yen to finance positions in tech stocks and U.S. Treasury notes. Higher Japanese rates make these trades less attractive.

A stronger yen typically creates downside pressure on Bitcoin. When the yen strengthens, it tightens global liquidity conditions. Bitcoin is particularly sensitive to these liquidity changes.

The yen is currently trading near 156 against the U.S. dollar. This is slightly stronger than its late November peak above 157.

If the BOJ raises rates as expected, some analysts predict Bitcoin could fall to $75,000. The level of disruption could push prices even lower depending on how much liquidity exits the market.

A crash to $50,000 appears less likely due to institutional demand supporting Bitcoin price. However, a major liquidity unwind could create stress across multiple markets.

Why This Time Might Be Different

The upcoming rate hike may not trigger the same level of market disruption as last time. Speculators already hold net long positions in the yen, which makes a snap reaction less likely. In mid-2024, speculators were bearish on yen.

Japanese bond yields have risen throughout 2024, hitting multi-decade highs. The rate hike would essentially bring official rates in line with where the market already is.

The U.S. Federal Reserve also cut rates by 25 basis points this week to a three-year low. The Fed introduced liquidity measures at the same time. The dollar index has dropped to a seven-week low.

These factors reduce the odds of a pronounced yen carry trade unwind. The combination suggests year-end risk aversion may be limited.

Japan’s fiscal situation requires monitoring going forward. The country has a debt-to-GDP ratio of 240%. Under Prime Minister Sanae Takaichi, fiscal expansion and tax cuts are arriving while inflation hovers near 3%.

MacroHive noted that investors are questioning BOJ credibility as bond yields steepen. The firm suggested Japan could start to look more like a fiscal crisis story than a safe haven.

The Bank of Japan holds its policy meeting on December 19, with the rate decision announcement expected that day.

The post Bitcoin (BTC) Price: Could Japan’s Central Bank Trigger Another Crash? appeared first on CoinCentral.

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