Japan’s Higher Rates Puts Bitcoin in the Crosshairs of a Yen Carry Unwind

first published 2025-12-05T16:01:36Z

Markets price ~90% odds of a 25bp Bank of Japan hike for Dec 18–19 as Japan’s 2‑year yield tops 1% (highest since 2008) and the 10‑year JGB hits a 17‑year high. Rising rates and a firmer yen threaten to reverse the yen carry trade that funded risk assets including crypto; an earlier BoJ move in August wiped ~$600B from crypto (BTC fell to ~ $49,000 and $1.14B in liquidations). Hedge funds warn of accelerating deleveraging as liquidity tightens in Japan, the US and China; Fed QT ends Dec 1.

AI Analysis

Traders assign ~90% probability of a 25bp BoJ hike; Japan’s 2‑year yield >1% and 10‑yr JGB at 17‑year high. The summary states the yen carry trade may rapidly unwind and that a prior BoJ move in August coincided with ~ $600B crypto market wipe (BTC ≈ $49,000 and $1.14B liquidations). Hedge funds are monitoring deleveraging as liquidity tightens; Fed QT ends Dec 1. These facts point to elevated short‑term downside risk for Bitcoin.

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