Alert! Bank of Japan rate hike countdown, Bitcoin may repeat the crash history, approaching the $70,000 mark

The global cryptocurrency market is holding its breath ahead of the Bank of Japan’s interest rate decision on December 19. The market expects a 25 basis point hike to 0.75%, with a probability as high as 98%. Macro analysts have issued warnings that historical data shows Bitcoin has experienced over 20% deep corrections following each BOJ rate hike since 2024. If this “curse” repeats, Bitcoin prices may face the risk of falling toward the key support level of $70,000. This article will provide an in-depth analysis of the “Yen carry trade unwinding” transmission mechanism and, combined with current technical and bullish-bearish divergences, interpret this potential black swan event.

The Historical Curse: BOJ Rate Hikes and BTC Crashes as a “Conditional Reflex”

An unsettling pattern is repeatedly discussed in the market: the Bank of Japan’s monetary policy adjustments seem to have developed a kind of “conditional reflex” relationship with Bitcoin’s price movements. Analyst AndrewBTC recently pointed out on social media that, since 2024, each of the three BOJ rate hikes has unavoidably served as a “trigger” for significant Bitcoin downturns. Specifically, after the March 2024 hike, Bitcoin fell about 23%; following the July 2024 hike, it dropped approximately 26%; and after the January 2025 hike, Bitcoin experienced a severe correction of over 30%.

This correlation is not coincidental; it is rooted in the deeper logic of global capital flows. Japan has maintained the lowest interest rates among major economies for a long time, making it a primary source of cheap leverage in international financial markets. Investors are accustomed to borrowing low-cost yen, converting to USD or other high-yield currencies, and investing in various risk assets, including US stocks and cryptocurrencies—this strategy is known as “Yen carry trade.” It acts like an invisible pipeline, continuously channeling liquidity from Japan into global markets.

Therefore, the BOJ’s rate hikes have spillover effects far beyond Japan’s borders. Raising interest rates directly pushes up the yen exchange rate and Japanese government bond yields, significantly increasing the cost of borrowing in yen. This not only suppresses new carry trades but may also force existing, large carry positions to unwind. To repay yen loans, global investors have to sell risk assets held in their portfolios, triggering liquidity tightening across markets. Bitcoin, as a typical high-beta risk asset, naturally bears the brunt. Current market pricing indicates a high probability of rate hikes this week, casting a thick shadow over Bitcoin’s outlook.

BOJ Rate Hikes and Bitcoin Historical Key Data

• March 2024 hike: Bitcoin subsequently declined about 23%.
• July 2024 hike: Bitcoin subsequently declined about 26%.
• January 2025 hike: Bitcoin subsequently declined about 31%.
• Current expectation (December 2025): 25 basis point rate hike with a 98% probability, with a potential downside target around $70,000 to $72,500.

Transmission Mechanism: How Yen Carry Trade Unwinding Drains Market Liquidity

Understanding the core of this potential crisis lies in clarifying the macro mechanism of “Yen carry trade unwinding,” which is somewhat obscure but crucial. Ignacio Aguirre, Chief Marketing Officer of Bitget, explained to the media that a strengthening yen “raises the risk of unwinding yen carry trades, which could temporarily depress cryptocurrency valuations because global leverage positions are resetting.” This statement precisely pinpoints the key issue—it’s not about Japan’s economy itself, but about the tightening of global dollar liquidity.

We can think of the global financial market as a huge liquidity pool. Japan’s long-standing low-cost yen acts like a high water level reservoir, continuously feeding into the main pool (dollar liquidity pool) through carry trade channels, pushing up asset prices across the board. When the BOJ hikes rates, it’s like suddenly raising the bottom of the reservoir, causing water (capital) to start flowing out. To close the pipeline and repay yen debt, investors need to withdraw liquidity from the main pool (sell assets). When many traders do this simultaneously, it can trigger a “liquidity shock” in the market.

For Bitcoin markets, this impact is especially pronounced. First, the crypto market’s relative small size makes it more sensitive to marginal changes in global liquidity. Second, the crypto market itself contains significant leverage; when risk appetite declines and liquidity tightens, deleveraging creates a negative feedback loop with selling, intensifying price volatility. Several analysts, such as 0xNobler, have explicitly warned that if historical patterns repeat, Bitcoin could “crash below $70,000” around the decision date. This level is not only a key psychological threshold but also coincides with technical analysis target zones.

Meanwhile, the weekly chart also shows signs of deterioration. After failing to break above the $100,000 level multiple times, Bitcoin’s momentum has weakened, with that level turning from support to strong resistance. Prices have fallen from the distribution zone near the cycle high and formed lower highs, confirming a short-term downtrend. The weekly RSI remains in the 30s, with no clear bullish divergence, indicating bears are still in control. Therefore, both macro narratives and technical patterns point market attention toward the $70,000 “battlefield.”

Bull-Bear Battle: Not All Analysts Are Bearish; Long-term Narrative Still Intact

However, the market has never only one voice. Amid widespread bearish warnings, alternative macro interpretations exist. Some analysts suggest combining the BOJ’s actions with the Fed’s policies. One view suggests that if the BOJ is “mildly tightening” while the Fed turns to a rate-cutting cycle, this could constitute a “regime shift” rather than a simple liquidity shock.

Analysts like Quantum Ascend believe that Fed rate cuts would release dollar liquidity and weaken the USD, while gradual BOJ rate hikes would strengthen the yen but might not substantially destroy overall global liquidity. The result could be a reallocation of capital worldwide in search of more attractive growth prospects, with cryptocurrencies potentially benefiting due to their asymmetric return profile. In other words, after short-term pain, the market might usher in a new rally driven by dollar liquidity.

Nevertheless, short-term risks remain significant. Analyst The Great Martis warns that the bond market is already forcing the BOJ into action, which “could trigger carry trade unwinds and cause severe damage to equities.” He also notes that major stock indices are forming a distribution top, and rising global yields are signs of increasing market pressure. Currently, Bitcoin remains range-bound in December with low volatility, which Daan Crypto Trades describes as “a very conflicted period before the year-end,” reflecting uncertainty before the market’s directional decision. The divergence of bullish and bearish views underscores the high uncertainty surrounding this rate decision, which could be a key catalyst for market direction into year-end and early next year.

What Is Yen Carry Trade?

Yen carry trade is a classic macro investment strategy. Due to Japan’s long-standing zero or negative interest rate policies, the yen has become one of the cheapest financing currencies for international investors. Carry traders borrow yen at very low rates, exchange into USD, EUR, or other high-yield currencies, then invest in government bonds, stocks, or cryptocurrencies in those regions to earn interest rate differentials and capital gains. The strategy relies on the low interest rates and exchange rate stability in Japan. Once the BOJ begins rate hikes, causing the yen to appreciate sharply or borrowing costs to rise, carry traders face exchange losses and narrowing interest margins, forcing unwinding and triggering a chain reaction of risk asset sell-offs.

How to Understand Bitcoin’s Macro Attributes?

Bitcoin is increasingly regarded by investors as a significant macro asset. Its price is influenced not only by internal supply and demand and network effects but also by global liquidity, USD index, and monetary policies of major economies. This is because: first, Bitcoin has no cash flows; its valuation largely depends on future adoption expectations discounted to present, making it sensitive to interest rate (discount rate) changes; second, as “digital gold,” it is used by some as a hedge against currency devaluation and inflation, linked to sovereign credit and monetary policy credibility; third, its high volatility and global trading characteristics amplify risk appetite and liquidity shifts. Understanding these relationships is crucial for short- and medium-term Bitcoin price analysis.

The BOJ’s interest rate decision is evolving from an ordinary monetary policy action into a “Damocles sword” hanging over the crypto markets. Warnings from historical data, technical signals, and macro transmission chains weave together a bearish narrative targeting $70,000. However, financial markets rarely repeat history exactly, and diverse interpretations of “Matsuyama tightening” create uncertainties. The volatility this week will serve as an important stress test of Bitcoin’s sensitivity as a mature macro asset and an opportunity to test traders’ risk management skills. Amid the noise of warnings and divergences, staying vigilant and respecting the market might be the best way to navigate this potential storm.