The recent move by Bank of Japan (BoJ) toward raising interest rates could spell trouble for $BTC liquidity — and by extension, its short-term stability. Here’s why:
The core issue is the unraveling of the yen carry trade: for years, investors borrowed cheap yen and converted it into risk assets like $BTC , fueling global liquidity and inflows into crypto markets.
As yields and borrowing costs in Japan rise, yen-funded carry trades become much less attractive, prompting many to unwind leveraged positions. That capital pullback drains liquidity from risk markets — especially cryptocurrencies.
Already, markets are reacting: surging Japanese bond yields triggered a sharp drop in Bitcoin below its recent support zone of ~$87,000.
With less liquidity and heightened risk-off sentiment, volatility is likely to increase. For retail and institutional investors alike, that means greater uncertainty — and potential forced selling if margin-long positions become untenable.
In short: what begins as a policy decision in Tokyo may ripple into crypto exchanges worldwide. For now, Bitcoin holders should brace for a tighter liquidity environment — which could translate to sharper swings, reduced depth in order books, and potential downward pressure on price.
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