Markets are preparing for a potentially decisive week for Bitcoin as the Bank of Japan (BOJ) heads into its policy meeting on December 18-19. Expectations point to a nearly certain rate hike.
Prediction markets and macroeconomic analysts are reaching the same conclusion: Japan is about to raise rates by 25 basis points. Such a move could have repercussions far beyond its national bond market and into global risk assets, especially Bitcoin.
The Bank of Japan's rate hike again puts Bitcoin's liquidity sensitivity in the spotlight.
Polymarket is currently assigning a 98% probability of a BOJ hike, with a paltry 2% betting that policymakers will keep interest rates stable.
The general sentiment among cryptocurrency analysts is that this is not good for Bitcoin, with the pioneering cryptocurrency already trading below the psychological level of $90,000.
If implemented, the move would take Japan's policy rate to 75 basis points, a level not seen in nearly two decades. Though modest by global standards, the change is significant because Japan has long been the leading source of cheap leverage.
For decades, institutions borrowed yen at ultra-low rates and deployed that capital into global stocks, bonds, and cryptocurrencies, a strategy known as the yen carry trade. That trade is now at risk.
"For decades, the yen has been the #1 currency that people would borrow and convert into other currencies and assets... That carry trade is now diminishing, as Japanese bond yields are rising rapidly," wrote analyst Mister Crypto.
If yields continue to rise, yen-funded leveraged positions may face liquidations, forcing investors to sell risk assets to pay off debts.
Fears of liquidity are rising amid the BOJ's history with Bitcoin.
The historical context is fueling anxiety in cryptocurrency markets. Bitcoin is currently trading at $88,956, down 1.16% in the last 24 hours.
However, traders are more focused on the current price and what has happened after previous BOJ hikes.
In March 2024, the price of Bitcoin fell approximately 23%.
In July 2024, it fell around 25%.
After the increase in January 2025, BTC fell more than 30%.
In this context, several traders see a worrying pattern, urging investors to prepare for volatility this week.
"Every time Japan raises rates, Bitcoin falls 20–25%. Next week, they will raise rates to 75 basis points again. If the pattern holds, BTC will drop below $70,000 on December 19. Position accordingly," warned analyst 0xNobler.
This week, therefore, analysts see the Bank of Japan as the biggest threat to Bitcoin's price, with a move towards $70,000 now on the cards.
Similar projections have been repeated in cryptocurrency-focused accounts, with repeated references to a possible drop below $70,000 if history rhymes. Such a move would constitute a 20% drop from current levels.
However, not everyone agrees that a BOJ hike necessarily means a decline. A competing macro narrative argues that Japan's tightening, when combined with rate cuts from the U.S. Federal Reserve, could ultimately be bullish for the cryptocurrency market.
The macro analyst Quantum Ascend framed the situation as a regime shift rather than a liquidity shock.
According to this view, Fed cuts would inject liquidity in dollars and weaken the USD, while gradual BOJ hikes would strengthen the yen without significantly destroying global liquidity.
The outcome, Quantum Ascend argues, is a rotation of capital into risk assets with asymmetric potential, the "sweet spot" of cryptocurrencies.
Still, short-term conditions remain fragile. The Great Martis warned that bond markets are already forcing the BOJ's hand.
"This could trigger the liquidation of the carry trade and wreak havoc on stocks," warned the analyst.
The analyst also pointed out the expanded highs in major stock indexes and the global rise in yields as signs of increasing stress.
Meanwhile, Bitcoin's price action reflects uncertainty. The price of the pioneering cryptocurrency has been largely flat during December, marking what analysts call a very unstable period towards the end of the year.
Specifically, analyst Daan Crypto Trades cites low liquidity and limited conviction ahead of the year-end holidays.
With stocks showing signs of highs, yields breaking upward, and Bitcoin historically sensitive to liquidity changes driven by Japan, the BOJ's decision is shaping up to be one of the most significant macroeconomic catalysts of the year.
If this triggers another sharp drop or sets the stage for a cryptocurrency rally following the volatility, it may depend less on the increase itself and more on how global liquidity responds in the weeks that follow.
