$BTC Everyone is concerned about whether the Bank of Japan (BOJ) will raise interest rates and whether this will affect the cryptocurrency market. Here's a prediction of the rate hike and its subsequent impact.
Yes, it's certain that the Bank of Japan (BOJ) is expected to raise interest rates (from 0.5% to 0.75%) at its December 18-19 meeting, which will indeed affect the cryptocurrency market.
This will primarily be through the partial unwinding mechanism of yen carry trades, leading to short-term liquidity tightening and selling pressure on risky assets. Bitcoin, as a high-risk asset, is particularly sensitive to such changes in global liquidity.
After Kazuo Ueda's speech on December 1st reinforced expectations of a rate hike, the yen appreciated rapidly, and Japanese government bond yields soared, triggering a global sell-off of risky assets.
Bitcoin fell from a high of approximately $92,000-$93,000 in late November/early December to around $85,000-$87,000, a drop of about 7-10%, accompanied by the liquidation of hundreds of millions of dollars in leveraged long positions.
The impact on Bitcoin is also present.
In the short term (around the December meeting): There is some downside risk, but a "crash-like" drop (such as the 18-20% flash crash in early 2024/2025) is unlikely.
The market has largely priced in the interest rate hike expectations (70-90% probability), and Japanese government bond yields have risen to multi-year highs, limiting the yen's appreciation potential.
Even with a 25 basis point hike, the Japanese interest rate would only be 0.75%, far lower than the US rate of around 3.75%, resulting in a large interest rate differential between the US and Japan, preventing a large-scale unwinding of carry trades.
Current Bitcoin price: approximately $89,000-$90,000, having rebounded from the early December lows, indicating market stabilization after digesting expectations.
Overall, this interest rate hike will bring short-term volatility and downward pressure (potentially another 5-10% drop), but is unlikely to cause a Bitcoin "crash" or a bear market. The crypto market is more mature, sensitive to such macroeconomic events but recovering quickly. We suggest paying close attention to the actual decisions made at the December meeting. If it's just a moderate interest rate hike coupled with dovish guidance, the market is likely to rebound quickly. When investing, be careful to control leverage to avoid being swept away by short-term fluctuations.
