Previously, every time Japan tightened its monetary policy, the price of Bitcoin experienced sharp corrections, often falling by 20% to 30% in just a few weeks...
Bitcoin is currently trading around $87,000, down from $89,000 (around 10 AM on December 17th), before the Bank of Japan (BoJ) officially announced its new interest rate adjustment.
The market is holding its breath, watching the Bank of Japan's interest rate decision tomorrow morning. Investors are almost certain that the Bank of Japan will raise interest rates for the second time this year, to 0.75%.
Tomorrow's decision by the BOJ could become one of the most important macroeconomic factors for the cryptocurrency market in 2025.
According to data from Polymarket, a blockchain-based prediction market platform, the probability of predicting that the Bank of Japan (BoJ) will adjust interest rates has risen to 98%, with only 2% betting on the BoJ keeping interest rates unchanged. The policy interest rate of 0.75%, while modest compared to global interest rates, is the highest in Japan in nearly 30 years.
The Bank of Japan's decision will not only have an impact in Japan, but will also spread to global financial markets, directly affecting risky assets, including Bitcoin.
According to the Economic Times, in the past, every time Japan tightened its monetary policy, the price of Bitcoin experienced sharp corrections, often falling by 20% to 30% in just a few weeks. Specifically, during the Bank of Japan's interest rate adjustment in March 2024, the price of Bitcoin fell by about 23%. In July 2024, the drop reached approximately 25%. By January 2025, Bitcoin had even lost more than 30% of its value in a short period.
This means that, with Bitcoin currently trading around $85,000–$90,000, the correction in Japan could pull the cryptocurrency's price down by 20-30%, to the $65,000–$70,000 range, according to many market forecasts.
Currently, many financial institutions choose to borrow in Japanese Capital due to low interest rates, to invest in stocks, bonds, and even cryptocurrencies. Therefore, rising interest rates will obviously shake up this leveraged model.
According to experts, whether the Bank of Japan's interest rate adjustment will trigger another sharp decline or lay the groundwork for a strong recovery after the volatility largely depends on the response of global liquidation in the following weeks.
Analysts warn that Bitcoin traders need to manage risk and stay close to the macroeconomic landscape in order to respond flexibly to market volatility.
Matt Hougan, Chief Investment Officer of Bitwise, believes the current global macroeconomic picture for the cryptocurrency market is quite "mixed" and unpredictable. Japan's interest rate hikes while the US lowers are creating opposing forces.
Mr. Hougan expects macroeconomic factors to have less influence on the long-term returns of the cryptocurrency market from 2026 onwards. However, currently, information such as "Japanese interest rates reaching a 30-year high" is actually putting downward pressure on the market in the short term.
Furthermore, the end of the year is typically a time when the market experiences low liquidation . Therefore, the impact of tomorrow's BoJ adjustment will undoubtedly be amplified amidst sparse trading sessions, increasing the risk of large liquidations in leveraged positions.
