Two scenarios: The Bank of Japan announces a rate hike vs. The Bank of Japan maintains interest rates:

The Bank of Japan announces a rate hike (current market expectation probability as high as 80%-98%)

Core impact: Large-scale liquidation of yen carry trades.

• Impact on Bitcoin: Bearish (short-term turbulence)

• Liquidity contraction: Many institutional giants borrow cheap yen (interest rate almost 0), then exchange it for dollars to buy Bitcoin. Once the yen is raised, borrowing costs increase, and the yen will also appreciate. To repay debts, these giants must sell their Bitcoin to raise funds.

• Historical backtesting: Reviewing the Bank of Japan's rate hikes in July 2024 and January 2025, Bitcoin experienced significant pullbacks of 20%-30% in the following days.

• Price target: Analysts warn that if the rate hike is accompanied by hawkish remarks, BTC may pull back to around 70,000 USD from the current 86,000-90,000 USD range.

The Bank of Japan maintains interest rates (minority expectation)

Core impact: Global liquidity temporarily remains unchanged.

• Impact on Bitcoin: Short-term bullish / sentiment recovery

• Short squeeze: Since the market has almost priced in a "rate hike" at nearly 100%, if it turns out there is no hike, it would be a huge "bearish exhaustion" for Bitcoin, potentially triggering a fierce rebound and challenging the 100,000 USD mark again.

• Risk aversion sentiment eases: Arbitrageurs do not need to rush to sell coins to repay debts, and market sentiment will quickly warm up.

What happens if Japan raises rates by 25 basis points, but the Federal Reserve (Fed) continues to cut rates?

This is known as "divergence in monetary policy." The Fed's easing (rate cuts) adds liquidity to the market, while Japan is tightening. These two forces will contend; if the Fed's easing is greater than Japan's tightening, Bitcoin may actually reach a "sweet spot" after a brief decline.