Concerns Over Bitcoin Dropping 30% as Japan Moves to Raise Interest Rates.. Will It Fall Back to $70,000?

The Bank of Japan is preparing to raise interest rates from around 0.5% to 0.75%, marking the first such move in 11 months, potentially reaching levels not seen in 30 years. This development has sparked anxiety in the cryptocurrency markets, with expectations that the decision could lead to sharp volatility, especially in the price of Bitcoin.

Analysts predict that this shift could push Bitcoin's price down toward $70,000, a decrease of up to 30%.

The Bank of Japan's meeting is scheduled to begin on December 18, with the final decision on the interest rate to be announced the following day, December 19, 2025.

👈Bitcoin and Japan Relationship

Experts believe that Japan is the "hidden engine" behind Bitcoin movements, due to investors' long-term reliance on Carry Trade transactions. Japan has been a source of low-cost borrowing, with nearly zero interest rates, allowing investors to borrow in yen and convert it into dollars or euros, then invest in higher-yield assets such as stocks and cryptocurrencies, benefiting from the interest rate differential.

However, this strategy is now under threat. As interest rates in Japan rise, borrowing in yen will become more expensive, reducing profit margins and increasing the risk of the yen appreciating, which could exacerbate losses for investors.

👈What’s the outcome?

Investors may be forced to sell their assets, primarily Bitcoin, to repay yen loans, in a process known as "unwinding Carry Trades," which typically triggers widespread sell-offs in cryptocurrency markets, putting significant downward pressure on prices.

Analysts base their forecasts on historical data indicating that Japanese interest rate hikes have previously been associated with sharp declines in Bitcoin's price, with this phenomenon occurring three times:

📌March 2024: Rate hike ⬅️ Bitcoin drops 23%

📌July 2024: Rate hike ⬅️ Bitcoin drops 26%

📌January 2025: Rate hike ⬅️ Bitcoin drops 31%

In light of these indicators, analysts advise investors to prepare for a period of intense volatility in cryptocurrency markets, coinciding with Japan's interest rate hike decision.
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