(GD Net Korea = Lee Jeong-hyun Media Research Institute) As the Bank of Japan (BoJ) raises the possibility of raising its base interest rate this week, attention is focused on the direction of the Bitcoin price.
Foreign media outlets, including Yahoo Finance, focused on the impact of Japan’s monetary policy changes on global risk assets on the 14th (local time).
Markets and analysts believe that the Bank of Japan is likely to raise the benchmark interest rate by 25 basis points. Even in the prediction market Polymarket, the current probability of an interest rate increase is 98%, while the probability of a freeze is only 2%.
As the possibility of an interest rate hike in Japan increases, attention is focused on the price of Bitcoin. (Photo = Created with Chat GPT)
There are predictions that this interest rate increase could have a negative impact beyond Japan’s domestic bond market and on global financial markets, especially risky assets such as Bitcoin.
If an interest rate increase is implemented, the base interest rate will rise to 0.75%, reaching the highest level in about 20 years. Although it is still low in absolute terms, it has great symbolic significance in that Japan has been a country that has provided the world’s lowest interest rates for a long time.
Currently, Bitcoin is trading at $87,786 on CoinMarketCap, a global coin market relay site, down 2.69% from 24 hours ago.
In the past, Bitcoin underwent a significant adjustment after Japan’s interest rate cut.
For decades, global institutional investors have adopted the so-called ‘yen carry trade’ strategy of borrowing yen at ultra-low interest rates and investing in stocks, bonds, and cryptocurrencies. However, if the yen interest rate continues to rise, leveraged positions financed in yen may be liquidated and selling risky assets to repay debt may become inevitable.
In fact, the price of Bitcoin has undergone a significant adjustment since the Bank of Japan raised interest rates in the past. It fell by 23% in March 2024 and about 25% in July 2024, and even after the increase in January 2025, the price of Bitcoin fell by more than 30%.
(Source = Image Today)
Accordingly, some analysts are urging investors to prepare for volatility this week. “Every time Japan raises interest rates, the price of Bitcoin falls by 20-25%. Next week, Japan plans to raise interest rates by 75 basis points. If this pattern continues, the price of Bitcoin could fall below $70,000 on December 19. Adjust your positions accordingly,” warned analyst 0xNobler.
There is also an analysis that this is good news for the cryptocurrency market in the mid to long term.
However, not all analysts interpret Japan’s interest rate hike as bad news for Bitcoin. Some analysts say that Japan’s interest rate hike is in line with the U.S. Federal Reserve’s interest rate cut policy and could actually be a positive sign for the cryptocurrency market in the mid- to long-term.
Cryptocurrency analyst Quantum Ascend interpreted this situation as a regime change rather than a short-term liquidity shock. The explanation is that the Federal Reserve’s interest rate cut will expand dollar liquidity and induce a weakening dollar, while the Bank of Japan’s gradual interest rate hike will raise the value of the yen without sharply reducing global liquidity. It is argued that during this process, capital can move into cryptocurrency, an asset with asymmetric upside potential.
Meanwhile, the price of Bitcoin reflects this uncertainty. In December, Bitcoin has continued to trend sideways without a clear direction, and analysts see this as a high volatility period that will continue until the end of the year. On-chain analyst Daan Crypto Trades pointed out that market liquidity is low ahead of the year-end holidays and there is a lack of confidence in investor sentiment.
While the stock market is showing signs of breaking through its peak and interest rates are under upward pressure, Bitcoin has historically responded sensitively to changes in liquidity from Japan. For this reason, foreign media reported that the Bank of Japan’s decision is likely to be one of the most important macroeconomic catalysts this year.
Whether this interest rate hike triggers another plunge or becomes the starting point for a cryptocurrency rally after a short period of volatility will likely depend more on how global liquidity reacts in the coming weeks than on the interest rate hike itself.
Jeonghyeon Lee Media Research Institute (jh7253@zdnet.co.kr)
