Warning! Yen rate hike may trigger short-term Bitcoin selling pressure, but the medium- to long-term narrative is stronger

The article analyzes the paradoxical situation between the Bank of Japan’s rate hike expectations and the market’s bearish stance on the yen, explores the indirect impact mechanism of yen policy on Bitcoin, and forecasts Bitcoin’s trajectory under different scenarios.

Author: White55

Source: Mars Finance

1. Market Paradox: Contrasting Rate Hike Expectations and Bearish Yen Sentiment

Although Bank of Japan Governor Kazuo Ueda has clearly hinted at a possible rate hike in December (with market pricing in a 91% probability), investors are still heavily betting on a weaker yen against the US dollar. Data from institutions such as Bank of America and Nomura Holdings show that speculative positions are significantly skewed towards USD/JPY appreciation. Citi’s “yen pain index” remains persistently below zero, reflecting entrenched bearish sentiment toward the yen. This paradox stems from two core reasons:

Persistence of interest rate differentials: Even if Japan raises rates by 25 basis points, its government bond yields remain much lower than US Treasuries, so the profit margin for carry trades (borrowing yen to buy US assets) still exists.

Doubts over policy strength: The market believes the BOJ is likely to take a gradual approach to rate hikes rather than a “shock therapy,” making it difficult to fundamentally change the yen’s weak status as a funding currency.

USD/JPY consolidates after hitting a 10-month high

Such bets have triggered a chain reaction—if the yen depreciates further, Japan’s import costs could rise, inflationary pressure may intensify, and Prime Minister Sanae Takaichi’s economic stimulus plans could be disrupted. Although Finance Minister Katsuki Katayama has attempted to intervene in the forex market, the effect has been limited, highlighting market skepticism about the actual effectiveness of policy measures.

2. The Link Between Yen Movements and Bitcoin: Liquidity Transmission and Risk Appetite Restructuring

The impact of yen policy on Bitcoin is not a direct causal effect but is transmitted indirectly through global liquidity structures and changes in risk appetite. The following is an analysis of the core transmission paths:

Short-term impact from unwinding of carry trades

The yen has long served as the world’s lowest-cost funding currency, with investors borrowing yen to purchase high-yield, risk assets such as Bitcoin. If a BOJ rate hike increases yen funding costs, carry traders may be forced to unwind positions (selling Bitcoin, repurchasing yen to repay loans), causing short-term selling pressure on Bitcoin.

Historical evidence: After Japan exited negative interest rates in 2024, Bitcoin fell about 12% that month, but rebounded over the next six months to reach a new stage high, showing a “drop then rise” two-stage reaction.

Medium-term impact from global liquidity rebalancing

A BOJ rate hike may prompt global capital to flow back to Japan from risk assets. For example, if Japanese government bond yields become attractive due to a rate hike, some funds may exit US Treasuries, tech stocks, and the crypto market, leading to a contraction in liquidity.

Supporting data: In November 2025, Bitcoin and gold both registered rare simultaneous declines, a result of tightening USD liquidity and the unwinding of yen carry trades.

Long-term divergence in Bitcoin’s safe-haven properties

When yen strength is accompanied by global macro uncertainty (such as policy divergence or geopolitical conflict), Bitcoin’s “super-sovereign asset” property may be enhanced. For example, after October 2025, Bitcoin’s correlation with US stocks weakened, and some funds viewed it as a tool to hedge sovereign credit risk.

Potential incremental local funds: Yen appreciation may reduce the cost for Japanese investors to allocate into USD-denominated assets. Coupled with Japan’s improved Web3 regulatory environment (such as stablecoin legislation and tax reform), this could attract domestic institutional inflows into the Bitcoin market.

3. Current Market Status: Bitcoin’s Liquidity Dilemma and Structural Shifts

Yen policy is only one macro variable affecting Bitcoin and must be considered alongside other factors:

Compounding effect of liquidity tightening: Delayed Fed rate cut expectations (currently down to 35% probability), continued net outflows from US Bitcoin ETFs (totaling $2.34 billion in November), and “whale” address reductions (long-term holders sold 815,000 BTC in November), have all contributed to increased Bitcoin selling pressure.

Extreme market sentiment: The Crypto Fear & Greed Index dropped to 9, its lowest since March 2020. However, on-chain data shows large strategic entities (holders of over 10,000 BTC) increased holdings by 10,700 BTC during the same period, suggesting assets are shifting from short-term traders to long-term investors.

4. Future Scenario Projections: Interactive Paths Between Yen Policy and Bitcoin

Based on historical patterns and current data, the following development paths are possible:

If the BOJ raises rates in December:

Short term (1 month): Carry trade unwinding may cause Bitcoin to correct below $85,000.

Medium term (3-6 months): Macro uncertainty may reinforce Bitcoin’s hedging narrative. If the Fed starts a rate-cutting cycle, capital may flow back into risk assets, and Bitcoin could return to $100,000.

If the BOJ holds steady:

Yen carry trades continue, providing short-term liquidity support for Bitcoin. However, policy uncertainty may delay global capital reallocation and increase volatility.

Conclusion

The paradox between yen rate hike expectations and market bearishness on the yen reflects the complexity of global liquidity restructuring. As a highly elastic asset, Bitcoin is susceptible to short-term shocks from carry trade unwinding but stands to benefit in the mid-to-long term from its super-sovereign nature and the potential inflow of compliant Japanese funds. Investors should look beyond single policy events and seize opportunities from a multi-dimensional perspective, considering liquidity cycles, regulatory frameworks, and asset rotation.