The Bank of Japan's imminent rate hike: Can Bitcoin continue its strength?

After reaching a high of $103,900 last year, Bitcoin has faced a series of market tests. Currently, the price hovers around $90.68K, with room for adjustment before the recent high of $126.08K. The upcoming decision on Japan's interest rate hike has become a focal point for the market—however, the true driver behind this adjustment may not be in Tokyo.

## BOJ Shift: The Market Has Already Priced It In

The Bank of Japan is scheduled to announce its rate hike decision on December 18-19, 2025. The market widely expects a 0.25 percentage point increase, bringing the benchmark rate to 0.75%—the highest level since 1995. Currently, the probability of a rate hike is about 76%.

Unlike the surprise rate hike in August that triggered market panic, investors are now mentally prepared. Although the yen appreciated slightly (+0.03%) on December 9, overall, it still faces structural pressure. The key point is that speculators had already reduced their yen short positions in the first half of the year, significantly lowering the risk of sudden unwinding. Analysts generally believe that this normalization of monetary policy will not cause unexpected shocks.

## Dual Forces at Play: Tightening vs. Easing

Bitcoin's fate often follows global liquidity trends. Currently, it is influenced by two opposing forces:

**Japan's tightening signals**: The rate hike may weaken the yen's appeal as an arbitrage financing tool, exerting selling pressure on risk assets. The unwinding of yen arbitrage trades theoretically could trigger capital outflows.

**U.S. easing support**: The Federal Reserve's recent rate cuts continue to inject liquidity into the market. This policy environment is clearly bullish for crypto assets. Even though Bitcoin ETFs experienced record outflows in November, the overall looser environment still provides a strong buffer.

Market data indicates that in the short term, BTC may fluctuate within the $85,000 to $95,000 range. In the long term, whether the Fed can maintain liquidity easing is more decisive than Japan's rate hike. As industry insiders point out, the contrast between the Fed's expected rate cuts in 2026 and Japan's tightening will create higher volatility—and this volatility often opens favorable accumulation windows for long-term holders.

## The Real List of Risks

Unwinding yen arbitrage trades is not the biggest threat. The tangible risks facing Bitcoin include:

- **Fed policy reversal**: If the Fed unexpectedly tightens monetary policy in 2026, it would undermine current expectations of rate cuts, with serious consequences.
- **Regulatory tightening**: Stricter ETF approval processes and upgraded stablecoin regulations could introduce variables.
- **Slowing institutional adoption**: Although inflows of institutional funds are generally viewed positively, a shift away could be bearish.
- **Asset competition**: Traditional assets like gold and tech stocks, if they increase yields and attractiveness, could divert crypto capital.

In comparison, the impact of Japan's rate hike is limited—the market has already priced it in, and participants are prepared. Bitcoin has repeatedly demonstrated resilience against monetary shocks. Whether it can once again show adaptability depends on whether the U.S. can sustain a liquidity-rich environment.