The Bank of Japan is imminent, Bitcoin is steadily consolidating in a "fragile balance"

Faced with the upcoming Bank of Japan (BoJ) meeting on December 18-19, the crypto market is once again plunged into tense anticipation. 98% of the market expects that this Japanese central bank will raise its key interest rate by 25 basis points to 0.75%—marking the first policy shift in nearly two decades. Currently, Bitcoin’s price hovers around $93.05K, down 2.14% in the past 24 hours, with the entire market seeming to sway between restraint and anticipation.

The Historical Shackles of Yen Carry Trade

Why would a policy adjustment by an Asian central bank shake the global crypto market? The answer lies in the decades-long history of the yen as the “Lending Currency King.” For years, investors borrowed yen from Japanese financial institutions at near-zero interest rates, then exchanged it for dollars, euros, or other high-yield assets for investment—this is the notorious yen carry trade. Bitcoin, stocks, and bonds have all benefited from this arbitrage strategy.

When the Bank of Japan maintains an accommodative policy, this “money flow” continuously streams into risk assets. But once interest rates rise, the cost of borrowing yen skyrockets, forcing many leveraged investors into forced liquidations.

Historical data confirms the power of this mechanism: in March this year, the Bank of Japan raised interest rates for the first time, causing Bitcoin to drop 23%; the second rate hike in July triggered a 25% decline; and in January this year, a third policy adjustment even led to a deep correction of over 30%. Some market observers openly state that every decision by the Bank of Japan on interest rates automatically signals a “short” for Bitcoin.

Liquidity Shock or Structural Shift?

However, not all analysts are pessimistic about this rate hike. Some macroeconomic researchers believe this should not be simply viewed as a “liquidity disaster,” but rather as a reconfiguration of the global monetary policy system.

The key lies in relative changes. Suppose the Bank of Japan indeed raises rates to 0.75%, but at the same time, the Federal Reserve continues to inject dollar liquidity or delays further tightening, then the change in interest rate differentials between the two could produce a subtle balancing effect. Rising yen borrowing costs are a fact, but if dollar supply remains ample and cheaper, capital might just flow from one stream to another rather than drying up completely.

This partly explains why Bitcoin has maintained relative resilience in recent weeks. Despite signs of fragility—rising bond yields, waning investor confidence, shrinking trading volume—prices have not collapsed. Instead, they show a “consolidation” posture, as if the market is digesting uncertainty while preparing for multiple possibilities.

Kingdom on the Beach

The current predicament Bitcoin faces essentially reflects its deep reliance on the global liquidity cycle. When central bank policies dominate, even the compelling narrative of Bitcoin as a “hard asset” often proves to be less influential than market realities.

The BoJ decision on December 19 could be a watershed. If the rate hike proceeds as scheduled and no other central bank liquidity measures fill the gap, Bitcoin might retest support levels below $70,000. But if, after the decision, the overall global financial conditions shift toward a “more easing” phase, this adjustment could instead be recorded in history as a “accumulation period” before a larger rally.

In any case, this moment serves as a reminder to all participants: the independence of cryptocurrencies remains limited, and the tide of macroeconomic monetary policy can easily drown out any micro-level optimistic expectations.