On a narrow ridge: Bitcoin awaits Japanese monetary upheavals

The cryptocurrency market world is holding its breath. The Bank of Japan is preparing to take a step that markets have not seen in nearly twenty years — raising the key interest rate at the December 18-19 meeting. The probability, estimated by the Polymarket platform at 98%, makes this date one of the most significant monetary events of the year for high-risk assets.

Currently, Bitcoin is trading at $92.21K with a daily increase of 1.53%, but this relative calm may be deceptive. History suggests: every BoJ decision regarding monetary tightening has usually led cryptocurrencies into sharp correction modes.

Japanese rates as a trigger mechanism

Pattern analysis shows a clear regularity. When the Bank of Japan has previously raised the interest rate barrier, Bitcoin has invariably fallen:

• March 2024: a decline of 23%
• July 2024: a loss of 25% in value
• January 2025: the harshest blow — more than 30% correction

The mechanism behind these drops lies in the destruction of one of the most attractive financial strategies of recent decades. Yen carry trade — a system that allowed traders and funds to borrow in yen at nearly zero interest rates and then invest the money in more profitable assets worldwide — is gradually losing its appeal.

Analyst 0xNobler explicitly expresses concern: when Japan tightens monetary conditions, Bitcoin usually drops by 20-25%. If the pattern repeats on December 19, this level could be tested from below, with a possible fall below $70,000.

The reason lies in a wave of forced liquidations. When Japanese bond yields rise, investors with high leverage find it unprofitable to hold risky positions financed in yen. They are forced to quickly sell Bitcoin, stocks, and other assets to close their positions, causing sharp downward pressure on prices.

Is this really a collapse or a reshuffling of global capital?

However, not all analysts see the upcoming BoJ decision as merely a negative scenario. Some market participants have proposed an alternative view, which appears more optimistic.

Quantum Ascend, a macroeconomist, argues that this is not so much a liquidity shock as a regime reconfiguration. His logic: if the US Federal Reserve continues to loosen conditions (by lowering rates or expanding its balance sheet), then the influx of cheaper dollars could offset the exit from yen carry trade.

In other words, investors’ exit from Japanese borrowings could be countered by an inflow of more generous US liquidity. In such a scenario, Bitcoin would not suffer from a local shock but instead remain in a favorable environment for growth.

Current consolidation as a marker of uncertainty

Over the past weeks, Bitcoin has demonstrated relative stability despite increasing macroeconomic signals of alarm. According to Daan Crypto Trades, such consolidation is characterized by extremely low liquidity and a lack of confidence among players ahead of holiday celebrations.

This state of being between fear and hope is driven by three factors:

• Insufficient capital: many traders have liquidated their positions before the holidays
• Waiting for data: the market is awaiting the final decision of the Japanese central bank
• Unequal attack angles: divergence between hedge fund fears of (liquidity shock) and institutional players’ hopes for (regime change) keeps the price trapped

A step into the unknown

The Bank of Japan’s decision is not just a number in the exchange rate table. It is a symbol of a global transformation of monetary conditions, which for years supported cryptocurrencies through excess liquidity.

Bitcoin remains in a fragile state of maintained equilibrium. If the BoJ follows the announced path, the quantitative exit from yen carry trade could force the cryptocurrency to reconsider its short-term targets. At the same time, the global macroeconomic context has not yet delivered a final verdict: everything depends on how the Federal Reserve and other central banks respond to the Japanese move.

Until December 19, Bitcoin will remain at the crossroads of two scenarios — correction or adaptation to a new regime. The market is waiting.