The shadow of interest rate hikes looms over the Crypto market. Will this week's Bank of Japan decision trigger Bitcoin to break below the 70,000 level?

The Bank of Japan is scheduled to hold a policy meeting from December 18 to 19. The tense atmosphere in the global financial markets has noticeably intensified, especially in the cryptocurrency market. Bitcoin (BTC) is seen as one of the most likely risk assets to be impacted this week. The market widely believes that a rate hike by the Bank of Japan is almost a certainty, and this policy shift could be a key factor influencing market trends around the end of the year. Polymarket’s prediction market currently estimates a 98% probability of a rate hike by the Bank of Japan, with only a 2% chance that policymakers will keep rates unchanged. This is purely market observation, not any investment advice.

High Consensus on Rate Hike Expectations, Although the Magnitude Is Small, Its Significance Is Great

Whether from prediction markets or macro analysts, there is a high consensus that the Bank of Japan is about to raise interest rates. The market expects the BOJ to increase rates by 25 basis points, raising the policy rate to 0.75%, the highest in nearly 20 years. Although this rate remains relatively low compared to other major central banks, it carries significant symbolic meaning for Japan, which has long adhered to an ultra-loose monetary policy. It also indicates that the era of low interest rates is gradually coming to an end.

The End of Japan’s Low-Interest Era, Yen Arbitrage Trading Under Pressure

Japan has long been a major source of low-cost funds globally. For decades, institutional investors borrowed yen at extremely low interest rates and invested the funds in global stocks, bonds, and cryptocurrencies, forming what is known as yen arbitrage trading. However, as Japanese bond yields rise, the attractiveness of such trades is diminishing, and market structures are beginning to change. Some online analysts also point out that if yields continue to climb, leveraged positions financed with yen in the past may be forced to close. This would prompt investors to sell risk assets to repay loans, and highly liquid assets like Bitcoin are often the first to be affected. Recently, Bitcoin’s price has fallen below the psychological level of $90,000, indicating a more cautious market sentiment.

Leverage Retreat and Rising Risks, Bitcoin as First to Suffer

Market concerns stem from past experience. Looking back at how Bitcoin responded after previous BOJ rate hikes, the price of Bitcoin has shown clear corrections. After the March 2024 rate hike, Bitcoin fell about 23%; after another rate hike in July 2024, it declined about 25%. Following the January 2025 rate increase, the price even dropped more than 30%. These historical data make investors particularly cautious about this week’s policy meeting.

Some traders believe that a high correlation has formed between BOJ rate hikes and Bitcoin declines. Analysts warn that if history repeats itself, Bitcoin’s price could drop sharply after the policy announcement, possibly breaking below the $70,000 mark—about a twofold decrease from current levels. This prompts calls for investors to adjust their positions in advance to prepare for potential volatility.

Simultaneous Long-Term Bullish Outlook for BOJ Rate Hike and Fed Rate Cut?

However, the market is not only pessimistic; some macro analysts offer a different perspective. They believe that if the BOJ raises rates while the Federal Reserve cuts rates simultaneously, it could have a medium- to long-term bullish effect on cryptocurrencies. In this scenario, Fed rate cuts would help release dollar liquidity and weaken the dollar, while the BOJ’s gradual rate hikes might strengthen the yen without causing global liquidity tightening.

Macro analyst Quantum Ascend describes this situation as a policy shift rather than a liquidity shock. According to this view, Fed rate cuts would inject dollar liquidity and weaken the dollar, while the BOJ’s gradual rate hikes would support the yen without significantly disrupting global liquidity. Quantum Ascend believes the outcome would be a capital shift toward high-growth, asymmetric return risk assets, of which cryptocurrencies are a prime example.

Such perspectives suggest that a change in policy combinations might lead to reallocations of capital into high-growth, asymmetric risk assets, with cryptocurrencies being a prominent beneficiary. However, even if the medium-term outlook is divided, the short-term market remains quite fragile.

Analysts point out that pressures in Japan’s bond market have already forced the BOJ to act, which could trigger a chain reaction of leveraged unwindings, further disrupting stock markets. Major global indices are oscillating at high levels, with rising yields, signaling increasing market pressure.

From a price perspective, Bitcoin has largely traded sideways throughout December, reflecting liquidity shortages and limited investor participation before the year-end holidays. Analysts believe this stagnation often precedes major market moves.

Against the backdrop of stock market peaks, rising global yields, and Bitcoin’s high sensitivity to BOJ policy, this policy meeting is viewed as the most important event of the year. Whether the rate hike will trigger a new round of sharp declines or merely cause short-term turbulence that paves the way for a rebound depends on future global liquidity changes and how markets digest Japan’s policy shift.

This article “Hiking Shadows Loom Over Crypto Markets: Will Japan’s Decision This Week Trigger Bitcoin to Break the $70,000 Barrier?” was first published on Chain News ABMedia.