Why did Bitcoin rise today? The Central Bank of Japan has exhausted its unfavourable information on interest rate hikes and has returned to 89,000.

On December 22, Bitcoin surged in the short-term at the beginning of the week, currently reporting around $89,000. Bitcoin welcomed three pieces of favourable information: the Bank of Japan raised interest rates by 25 basis points to 0.75%, a 30-year high, but the yen fell instead of rising; although there are concerns about distortion in the U.S. CPI data, it still shows signs of cooling inflation, solidifying expectations for interest rate cuts in 2026; technically, the repeated lower wicks appearing in Bitcoin's candles indicate that long-term buyers are buying the dips.

The negative effects of Japan's interest rate hike have been fully realized

The primary reason for Bitcoin's rise today is the “shoe dropping” effect of the Bank of Japan's interest rate hike. On Friday, the Bank of Japan raised its policy interest rate by 25 basis points to 0.75%, the highest level in thirty years. The decision was passed with a unanimous vote of 9-0, fully in line with market expectations. All 50 economists surveyed predicted that the Bank of Japan would take action to raise interest rates this time.

The market's biggest concern of closing the yen arbitrage trades has not occurred. After the announcement of the decision, the yen fell against the US dollar, briefly dropping to 157.67, hitting a new high in four weeks. This anomaly indicates that the interest rate hike is insufficient to reverse the yen's weakness, and the market has fully digested the expectations. When the “maximum unfavorable information” lands and the impact is less than expected, it instead triggers a rebound of “unfavorable information has been fully priced in.”

In the past week, Bitcoin fell from $90,000 to $84,450, with Japan's interest rate hike expectations being the main source of selling pressure. Zhang Lin, head of LBank Labs, warned: “The Bank of Japan's interest rate hike will remove the arbitrage trading fuel that has supported global risk assets for many years, turning liquidity from abundant to weak.” However, when the rate hike actually occurred and the yen failed to strengthen, these concerns proved to be excessive.

At a post-meeting press conference, Ueda Kazuo remained vague about the specific timing and pace of future interest rate hikes, only stating that the door remains open for further tightening of policy. This vague statement was interpreted by the market as dovish, as it suggests that the next rate hike may come later than the market expects in April 2026. The Nomura Global Foreign Exchange Strategy team pointed out that only when the Central Bank hints that the next rate hike will occur earlier than the market expects can the yen truly strengthen. Ueda failed to provide such hawkish guidance, causing the yen to naturally weaken, and a weaker yen is favourable for risk assets like Bitcoin.

Macroeconomic support from cooling inflation and interest rate cut expectations

The second reason why Bitcoin has risen today is the improvement in the macro environment. From a macro perspective, Bitcoin still benefits from the easing of inflation expectations and changes in the outlook for U.S. interest rates. Recent U.S. CPI data shows that inflation continues to decline, further solidifying market expectations that the Federal Reserve may cut rates further in 2026. Lower real yields tend to reduce the opportunity cost of holding Bitcoin, thus supporting demand during market consolidation.

In November, the CPI in the United States rose by 2.7% year-on-year, lower than the 3.0% in September and also below the market expectation of 3.1%. The core CPI, which excludes food and energy prices, increased by 2.6% year-on-year, down from the previous 3.0%. Although economists warn that the 43-day government shutdown could lead to data distortions (the Bureau of Labor Statistics made “imputed” estimates for up to 40% of the data), the market still views it as a signal of cooling inflation.

According to Capital Edge's interest rate probability data, the market's expectation for a rate cut by the Federal Reserve at its next meeting on January 28 remains at 24%. Investors anticipate a rate cut space of 60 basis points over the next year, with the first rate cut expected to occur in June. This expectation of rate cuts provides mid-term support for Bitcoin, as the low interest rate environment reduces the opportunity cost of holding zero-yield assets such as gold and Bitcoin.

Three Macro Supports for Bitcoin's Rise Today

Confirmation of Inflation Cooling: The US November CPI decreased to 2.7%, and the core CPI decreased to 2.6%. Although there are concerns about distortion, the direction is clear.

Expectation of Interest Rate Cut Solidified: The market is pricing in a 60 basis point rate cut in 2026, with the first cut expected in June, and low interest rates are favourable for risk assets.

Real Yield Decline: Nominal interest rates are falling faster than inflation, compressing real yields and reducing the opportunity cost of holding Bitcoin.

Institution positions remain robust. The spot Bitcoin ETF continues to solidify long-term capital inflows, even as short-term traders rotate out during market volatility. At the same time, the regulatory transparency across major jurisdictions is slowly improving, which helps Bitcoin maintain its position as a core digital asset. The SEC withdrew the 2023 policy restricting bank involvement in crypto businesses, and the FDIC initiated the GENIUS Act for stablecoin regulation, which clears obstacles for institutional funds entering the market.

Technical absorption completed and directional breakthrough preparation

(Source: Trading View)

The third reason for Bitcoin's rise today is the signal of technical absorption completion. Despite recent declines, the selling pressure remains controllable. Bitcoin's failure to effectively break below the $84,500 to $85,000 range indicates that long-term buyers are buying the dips. The repeated appearance of lower wick candles near this range suggests absorption rather than forced liquidation, a pattern that often occurs during adjustment pauses in a large upward trend.

From the 4-hour chart, the Bitcoin price forecast is still within the broad upward channel that has been guiding the price trend since late October. The break below the 50-day moving average around $88,200 and the 100-day moving average around $89,050 confirms short-term downward pressure, but the momentum indicators are stabilizing. The Relative Strength Index (RSI) has rebounded to around 57, remaining above the oversold level, suggesting that the downward momentum is weakening.

The current price is compressing upwards to the key area of $88,200 to $89,200, which combines the previous support level and the mid-channel resistance level. This compression indicates that the market is preparing for a directional trend rather than a continued decline. If Bitcoin can regain a foothold above $89,200, a rebound to $92,000 is expected, followed by another test of $94,200 (the previous range high). If it fails to break through the resistance level, the downside risk remains, potentially falling to $84,500, with deeper support around $80,600.

The market structure shows that the market is digesting demand rather than panicking. The selling pressure is manageable, the technical indicators are stable, and the channel structure is complete. These signals all suggest that the current situation is a consolidation rather than a trend reversal. With increasing volatility and confidence gradually being rebuilt, the current stagnation of Bitcoin seems less about weakness and more about preparing for the next decisive move.