Bitcoin Surges, Then Plunges as Markets Grow Wary of a Potential BOJ Rate Hike

The cryptocurrency market remained volatile on the 19th. Bitcoin (BTC) briefly climbed above $89,000 (approximately ¥13.9 million) before sharply reversing course. At the time of writing, BTC was trading around $85,000 (approximately ¥13.2 million).

The focus was on the U.S. Consumer Price Index (CPI), which came in at 2.7% year-on-year, below the market forecast of 3.1%, indicating a slowdown in inflation and boosting expectations for additional rate cuts next year. In addition, strong earnings reported by semiconductor memory maker Micron Technology reinforced optimism around AI-related investment demand, pushing U.S. equities—particularly technology stocks—higher. The Dow Jones Industrial Average rebounded for the first time in five trading sessions.

Cryptocurrencies, including Bitcoin, initially surged in response. However, prices later plunged amid profit-taking ahead of the Christmas holidays, resulting in price movements that diverged from those of equities.

A key factor driving caution in the crypto market is the upcoming Bank of Japan (BOJ) monetary policy meeting. The BOJ is widely expected to raise its policy rate from 0.5% to 0.75% at this meeting. While some market participants believe the rate hike has already been priced in, others remain wary of future policy guidance or potential surprises, leading to a strong wait-and-see stance across both equity and crypto markets.

Historically, Bitcoin prices have tended to decline following BOJ rate hikes. Earlier this year, when the BOJ raised rates to 0.5% in January, Bitcoin fell and subsequently entered a prolonged period of weakness.

This trend is often attributed to the unwinding of yen carry trades, which are fueled by Japan’s relatively low interest rates compared to other countries. As these trades are reversed, capital tends to flow out of risk assets such as Bitcoin.

While some analysts argue that the impact of a BOJ rate hike may be limited, considering the approach of the Christmas holiday period in Europe and the U.S., temporary spikes in volatility cannot be ruled out.

Image: Shutterstock

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