The Bank of Japan's rate hike could trigger a 20-30% drop in Bitcoin as markets price in a 98% probability

Markets are gearing up for a potentially decisive week for Bitcoin as the Bank of Japan (BOJ) heads into its policy meeting from December 18 to 19. Expectations point to a nearly certain rate hike.

Prediction markets and macroeconomic analysts are coming to the same conclusion: Japan is poised to raise rates by 25 basis points. Such a move could reverberate far beyond its domestic bond market and into global risk assets, especially Bitcoin.

The Bank of Japan's rate hike once again puts Bitcoin's liquidity sensitivity in the spotlight

Polymarket is currently assigning a 98% probability of a BOJ hike, with a meager 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 bring Japan's policy rate to 75 basis points, a level not seen in nearly two decades. Although modest by global standards, the change is significant because Japan has long been the world's main source of cheap leverage.