## Bitcoin and the Fluctuations from Japan's Interest Rate Decision

This week, the cryptocurrency market will witness significant volatility as the Bank of Japan prepares to conclude its two-day policy meeting on Friday, with expectations of raising interest rates for the second time this year. This event not only impacts Japan's economy but also creates a Doppler effect spreading across the entire global financial system, especially for risky assets like cryptocurrencies.

Bitcoin is currently trading at $90,810 with a 0.06% increase over the past 24 hours, according to CoinGecko data. This price remains far from the all-time high of $126,080 reached in October last year, meaning BTC has decreased nearly 28% from that level. This decline reflects ongoing pressures from the macroeconomic environment, where central banks are gradually tightening monetary policy after years of extreme easing.

## Abandoning Ultra-Loose Policy — A Global Shift

Japan's central bank action marks a significant turning point in efforts to normalize monetary policy. Although the new interest rate remains low by international standards, it sends a clear signal that the era of unlimited monetary easing is over. Forecasts indicate borrowing costs will continue to rise until 2026 despite political and economic challenges faced by the world's fourth-largest economy.

This change directly impacts global capital flows. As countries tighten monetary policy, global liquidity will contract, putting pressure on high-risk assets, including Bitcoin. This Doppler effect — the transmission of policy decisions from one country across the global market — is one of the top concerns for crypto traders at this time.

## Yen Carry Trade — A Lubrication Mechanism for Risk Assets

A key factor the market is watching is the end of yen carry trade transactions(. These trades involve borrowing yen at nearly zero interest and investing in assets denominated in US dollars or cryptocurrencies with much higher interest rates. Traders profit from the interest rate differential between the two countries.

Some analysts point out that when the Bank of Japan raises interest rates, this mechanism will break down. The yen exchange rate will return to normal, and the carry trades that have lubricated the global crypto market for years will be shut down. This phenomenon will cause liquidity to shift from abundant to scarce, creating widespread selling pressure.

According to experts, while this volatility may create some unique borrowing opportunities among major assets, "these opportunities are very rare when fundamental factors change." The broader impact will be to curb speculative behavior. When liquidity is scarce, Bitcoin's scarcity will overshadow the virtual nature of other cryptocurrencies.

## A Complex Macroeconomic Landscape — Opposing Forces

However, the global situation is not limited to Japan's interest rate hike. Analysts point out that the macro environment for cryptocurrencies is very complex and full of contradictions:

- Japan raises interest rates )disadvantageous for cryptocurrencies(
- The US lowers interest rates )advantageous for cryptocurrencies(
- The Federal Reserve buys government bonds )supporting the market(
- Europe stalls and falls into a recession )negative(

These opposing forces are likely to offset each other in the long term. Therefore, macroeconomic factors will not be the main drivers of long-term crypto profits by 2026.

However, in the short term, these factors are expected to increase market volatility significantly, as investors oscillate between excitement over the Fed's rate cuts and panic as yen carry trade positions are closed.

## Market Forecast — Investor Caution

Market forecasts indicate a 66% probability that Bitcoin will retest the $100,000 level, although this figure has decreased from 72% last week. This suggests that while the outlook may be optimistic, investors remain cautious about macroeconomic risks.

Regarding the expected rate hike on Friday, some experts say "the market has already priced this in, so it is reflected in the price." However, they also warn that "the fact that Japan's interest rates are at their highest in 30 years remains a concerning headline." In the current market environment, investor reactions to this news could exert downward pressure in the short term.

## Risks from Low Liquidity

Additionally, due to low liquidity ahead of the year-end holiday, Bitcoin and the entire crypto market will remain vulnerable. The market could continue to experience high volatility, amplifying fluctuations and potentially triggering large-scale liquidations.

Changes in global capital flows make the future interest rate trajectory of the Bank of Japan and the potential unwinding of yen carry trades the focus of crypto traders. The Doppler effect of these policy decisions will continue to spread across the market in the coming weeks.