December Reversal in the Crypto Market! Bank of Japan's Statement Triggers Chain Reaction

December 1st is destined to be recorded in the history of the crypto market. Although the Federal Reserve signaled last month that rate cuts are close with about a 90% probability, Bitcoin experienced an unexpected plunge on Monday, breaking through the $90,000 level intraday and dropping to a low of $85,689, a 5% decline. Ethereum performed even worse, falling 5.9% and directly breaking below $3,000. Other cryptocurrencies fared even worse—ZEC plummeted 15.51%, HYPE and DOGE decreased by 9.84% and 6.2%, respectively.

According to Coinglass statistics, approximately 180,000 traders were liquidated within 24 hours worldwide, with a total liquidation amount of $537 million. The intensity of this downward move caught many off guard.

**Who is the real culprit? It turns out to be the Bank of Japan**

On the surface, the Federal Reserve’s independence being under political pressure is a major factor. Recently, Trump announced that the next Fed chair has been decided, and the market widely expects Kevin Hasset, director of the Council of Economic Advisers, to succeed Powell. This policy shift indeed weakened the dollar, boosting gold prices (hitting $4,256, a two-week high) and silver (rising to 57.8, approaching the all-time high of 58).

But the true culprit behind the crypto market crash is the Bank of Japan. On December 1st, BOJ Governor Ueda Kazuo stated that the central bank would seriously assess the feasibility of raising interest rates at the upcoming monetary policy meeting in mid-December (18-19). This statement was interpreted by the market as the strongest signal of a rate hike in December. Subsequently, traders reacted through overnight index swap (OIS) pricing, with the probability of a December rate hike soaring from 58% to 76%, and the chance of a hike in January next year reaching 94%.

Japanese government bond yields rose to 1.877%, and USD/JPY dropped to 155.37. The Japanese stock market also ended its four-day winning streak, closing down 1.89%.

**Liquidity Alert and Market Outlook**

Why does the BOJ’s rate hike impact the global crypto market? The logical chain is as follows: rate hike → yen appreciation → accelerated repatriation of Japanese overseas funds → Japanese financial institutions forced to sell U.S. Treasuries to buy Japanese bonds to lower yields → tightening global liquidity. This chain of reactions directly squeezed the liquidity space of the crypto market.

Sean McNulty, Head of APAC Derivatives Trading at FalconX, pointed out that the biggest concern now is the weak net inflow into Bitcoin ETFs, with the market lacking the buying power to absorb dips. This was the direct trigger for the sharp decline.

However, from a technical perspective, the situation is not entirely pessimistic. The daily chart of Bitcoin shows that although breaking below the $90,000 level indicates strong bearish momentum, the overall trend remains within a rebound cycle. Short-term key support levels are around $85,000-$86,000; if these can hold, the market may test the $90,000 and even $95,000 resistance levels again.

As the market gradually digests and adjusts to the BOJ rate hike expectations, the ongoing liquidity impact is expected to be limited. Currently, BTC is quoted at 91.49K and ETH at 3.14K, with the rebound momentum gradually stabilizing. Investors can look for buying opportunities near support levels but must control risk exposure.