Oh no, the crypto market has started to panic again these days. Bitcoin has dropped from over 90,000 to the low 80,000s. Everyone is asking: the Bank of Japan hasn't even raised interest rates yet, so why did BTC "drop out of respect" first? Simply put, the core issue is the yen carry trade working against us.

In recent years, Japan's interest rates have been extremely low. People borrow cheap yen and convert it into dollars to buy high-risk assets—Bitcoin is a typical beneficiary, surging when liquidity loosens. Now, the Bank of Japan is very likely to raise interest rates by 25 basis points to 0.75% tomorrow (the 19th), the highest in 30 years. The market prices it at 98% on Polymarket. With the rate hike, the cost of borrowing yen increases, eliminating arbitrage opportunities. Large funds will close positions early and return capital to Japan, tightening global liquidity. Bitcoin, being a high-beta asset, is most sensitive and gets sold off first. Historically, every time Japan raises interest rates, BTC has fallen 20-30%: March 2024 - 23%, July - 26%, January 2025 - 31%.

This time, the market has already front-run the move, with net inflows into exchanges surging and leveraged longs being liquidated. In the short term, there may be another wave of selling after the meeting, and $70,000 is not impossible.

But if the rate hike is just expected and no hawkish signals are confirmed, the market might rebound in a few days—after all, year-end liquidity is low, and volatility is high. Fellow traders, hold your positions steady, don’t panic. Wait until the dust settles before adding more. That’s how the crypto world works—when macroeconomics sneezes, we catch a cold first.