Japan's Rate Hike Imminent: Why Bitcoin Might Not Drop This Time? Three Major Signals Indicating a Change in Market Logic

"Japan's Central Bank hikes once, Bitcoin must crash!" As the Tokyo Central Bank's rate decision approaches, such predictions are once again rampant in the crypto community. Yesterday, Bitcoin retreated from a high of $90,000 to $85,616, a 5% drop in one day that seems to confirm this panic.
But looking beyond the surface to the essence, this market script may be being rewritten.
Historical Burden: Three Rate Hikes, Three Bloodbaths
Market PTSD from Japan's rate hikes is not unfounded. After three hikes in March 2024, July 2024, and January 2025, Bitcoin experienced declines of over 20% each time. The most severe was in July 2024, when Bitcoin plummeted from $65,000 to $50,000, evaporating $600 billion in market value across the crypto space.
This is driven by the classic "yen arbitrage" logic: investors borrow zero-cost yen, exchange it for dollars, and invest in high-yield assets. When Japan hikes rates, increasing yen financing costs and pushing up the exchange rate, these leveraged positions are forced to close urgently, converting back to yen to repay debts. Bitcoin, as a liquid risk asset, naturally becomes the first "cash machine."
Three Unusual Signals Suggest a Different Script
However, three intriguing changes are emerging in the current market:
Signal One: Short Sellers Have "Surrendered" Early
The reason for the market crash in July 2024 was that most funds did not anticipate the rate hike; at that time, speculative capital was still heavily shorting the yen. Now, Polymarket shows a 98% probability of a 25 basis point hike, and speculative positions in yen have shifted from net short to net long. This indicates that after the hike, the yen's appreciation potential is limited, reducing the motivation for panic selling.
Signal Two: The Bond Market Has "Jumped the Gun"
Japan's 10-year government bond yield has surged from 1.1% at the start of the year to nearly 2%, hitting an 18-year high. The bond market has effectively completed a "self-initiated rate hike," and the central bank's decision may be seen as a recognition of the current situation. When policies are fully priced in by the market, their impact naturally diminishes.
Signal Three: US and Japan Play a "Policy Tug-of-War"
While Japan may hike rates, the Federal Reserve has just cut rates by 25 basis points. This "US easing, Japan tightening" policy combo prevents global liquidity from tightening simultaneously, providing a buffer for risk assets.
Bitcoin's "Identity Crisis": From Safe Haven to Risk Asset
A deeper question is: why does Japan's rate hike have such a significant impact on Bitcoin?
Data shows that early 2025, Bitcoin's correlation with the Nasdaq 100 index reached 0.8, a new high since 2022. Before 2020, this figure hovered between -0.2 and 0.2. This indicates that Bitcoin is no longer an independent "digital gold" outside traditional finance but is now deeply embedded in Wall Street's risk asset portfolios.
The launch of US spot Bitcoin ETFs has accelerated this process. Pension funds, hedge funds, and other institutional investors are incorporating Bitcoin into their "risk budgets." When global liquidity tightens, they do not differentiate between Bitcoin and tech stocks but reduce their holdings proportionally. Bitcoin's relatively shallow market depth and good liquidity make it the first to be affected during deleveraging.
The Underlying Currents of Smart Money: Who Is Increasing Positions During the Drop?
Interestingly, on-chain data reveals another picture. Despite the price correction, large strategic addresses holding over 10,000 BTC are quietly accumulating, while exchange reserves continue to decline, with more tokens transferred to cold wallets for long-term holding.
This suggests assets are shifting from short-term traders to long-term holders, optimizing market structure. Additionally, the expected yen appreciation reduces the cost for domestic Japanese funds to enter the market. Coupled with improved Web3 regulations and tax reforms in Japan, policy benefits may be unleashed after liquidity shocks subside.
Options market sentiment indicators also do not show extreme pessimism. Although demand for put options has increased, the 25-Delta risk reversal has not shown panic levels, indicating professional investors are hedging risks rather than fleeing in panic.
Conclusion: History Won't Simply Repeat, But It Will Rhyme
As the Bank of Japan's move unfolds, market focus will shift to a new balance—between the liquidity injection from US rate cuts and the arbitrage adjustments from Japan's rate hikes. The outcome of this tug-of-war will determine Bitcoin's short-term trajectory.
But one thing is certain: the era of blindly following headlines is over. The market always rewards those who can distinguish signals from noise and punishes those driven by emotion.
How do you view Japan's rate hike's long-term impact on the crypto market? Share your insights in the comments!
Follow us for more in-depth market analysis
Don't forget to like and support, so more investors can see professional perspectives
Share with your investment partners to stay ahead of market trends
Leave your thoughts and collide with the wisdom of millions of investors