Why the Bank of Japan Is So Critical for Bitcoin
The Bank of Japan's monetary policy, particularly interest rate hikes, significantly impacts global liquidity via the yen carry trade, often leading to sharp Bitcoin price drops.Summary
While Bitcoin traders often focus on the US Federal Reserve, the Bank of Japan (BoJ) is critical because its decades-long policy of near-zero or negative interest rates made the yen the world's cheapest currency to borrow. This fueled the yen carry trade, where institutions borrowed yen and converted it into higher-yielding assets globally, including Bitcoin, providing cheap and abundant liquidity.
A BoJ rate hike, even a modest one like 25 basis points, signals a structural shift in funding conditions. If markets anticipate a multi-step tightening cycle, traders preemptively cut exposure to risk assets like Bitcoin.
This tightening strengthens the yen and pressures global risk assets, causing Bitcoin to fall through technical levels. Since crypto relies heavily on leverage (perpetual futures), this price drop triggers forced liquidations as long positions are automatically sold off, creating a cascading loop that results in sharp, macro-driven crypto crashes.
(Source：BeInCrypto)