Friday, December 19, is circled on the calendars of global investors. On that day, the Bank of Japan (BoJ) will announce its latest interest rate decision. The market is anticipating a rate hike, and there’s a strong possibility that the Japanese decision could usher in a period of red numbers for cryptocurrencies.
Financial analysts expect that a rate hike will put pressure on cryptocurrencies like bitcoin. The tension leading up to Friday is therefore mounting. Will bitcoin take a sharp hit because of the ’land of the rising sun'?
Foto: Osaze Cuomo/Shutterstock
Japan Rate Hike Hits Bitcoin #
A rate hike by the Japanese central bank could be a cold shower for the crypto market. Recent history shows that bitcoin often reacts negatively when the BoJ raises interest rates. Since 2024, every rate hike has coincided with a bitcoin correction of more than 20 percent, according to data shared by financial analyst AndrewBTC on X:
🚨 BREAKING: JAPAN WILL CRASH $BTC
Bank of Japan is set to hike rates +25 bps on Dec 19. Japan = largest holder of US government debt 🇯🇵
📉 Look at the $BTC chart:
Every BoJ rate hike → Bitcoin dumps over 20%+👇
• March 2024 → -23% • July 2024 → -26% • January 2025 →…
This pattern since 2024 has investors very concerned. When the monetary tap from Japan is tightened further, global liquidity disappears from the market. This means there is less money to invest. Moreover, investors become less willing to invest in risky assets like bitcoin, ethereum, and XRP. This creates additional pressure on cryptocurrencies, often resulting in price drops and negative sentiment among investors.
Why a Strong Yen Hurts Crypto #
A Japanese rate hike makes bitcoin weaker, but the yen stronger. This also throws a wrench in the works for investors hoping for quick profits. A strong yen makes borrowing much more expensive. This is while the Japanese currency has served as fuel for risky trading for years.
Many traders borrowed cheap yen and then put that money into stocks and crypto. This trick is known as the ‘yen carry trade’. After a rate hike, the chance of extra returns diminishes. In that case, it remains to be seen how investors will react.
If investors start to unwind their positions, the flow of money could dry up quickly. And then the crucial question arises: what does that mean for the price of bitcoin?
How the bitcoin price reacts to a rate hike cannot be predicted. The fact is that the Japanese rate hike removes liquidity from international markets. The previous times this happened, BTC took hard hits, as shown by the analysis from financial expert ‘AndrewBTC’.
Technical Signals Point to Further Downside Risk #
According to a poll by news agency Reuters, a majority of economists expect a rate hike on December 19. This is not a positive outlook for the vulnerable stock and crypto market. A positive turnaround is not yet in sight, judging by various analyses and charts.
Macro analysts fear a so-called ‘risk-off’ reaction, meaning investors will more quickly opt for safety. Investors are unwinding their positions and taking less risk.
Additionally, there are technical signals pointing to a bear market in which bitcoin could sink to $70,000. A ‘bear flag’ formation is visible in the BTC chart. This was followed by a brief recovery. However, with such a formation, this is often short-lived and the price decline eventually continues.
It is important that bitcoin does not break below the lower trend line of the bear flag. If it does, the cryptocurrency could potentially dip further. A price between $70,000 and $72,000 is not out of the question in that scenario. Analyst EX views the developments in Japan with little confidence:
“Every time Japan raises interest rates, Bitcoin falls by 20 to 25 percent. Next week they are raising rates again, this time to 75 basis points. If this pattern repeats, Bitcoin could fall below $70,000 on December 19. Position yourself accordingly.”