Bank of Japan Rate Hike May Devastate the Crypto Market

Core Event: On December 18-19, 2025, the Bank of Japan plans to increase the benchmark interest rate by 25 basis points to 0.75%, marking the highest level in nearly 30 years since 1995. The market widely anticipates a 98% probability of this rate hike, which could trigger a tightening of global liquidity and pose significant volatility risks for the cryptocurrency market.
Event Summary

Hiking Background and Expectations: The Bank of Japan's rate hike is mainly driven by domestic inflation pressures (core CPI rising 2.5% year-over-year in November) and yen depreciation (close to 156 against the US dollar), requiring tightening policies to stabilize the economy. If implemented, this would be the first adjustment since January 2025, with policy rates rising to 0.75%.

Historical Impact and Market Concerns: Since 2024, the Bank of Japan's three rate hikes have all led to significant declines in Bitcoin (23%-31%). Markets worry that this rate hike will repeat the "yen carry trade unwinding" effect: investors selling high-risk assets like Bitcoin to repay yen-denominated debt, leading to liquidity crunches. After the July 2024 rate increase, Bitcoin plummeted from $65,000 to $50,000, wiping out $600 billion in market value.

Current Risks and Divergent Views: Analysts predict that if the rate hike occurs, Bitcoin could fall below $70,000 to $75,000 (currently around $90,000). However, some believe the market has already priced in the rate hike expectations, and a Fed rate cut could ease the impact, presenting a rebound opportunity after volatility.

Long-term Concerns: Japan's debt-to-GDP ratio has reached 240%, and rate hikes could intensify fiscal pressures, potentially triggering a chain reaction in global markets in the long run. While the crypto market, characterized by high volatility, faces short-term pressure, its decentralized nature is still viewed as a tool to counter traditional financial risks.