Japan's interest rate hike is imminent, why might Bitcoin not fall this time? Three signals suggest that market logic has changed.

"As soon as the Bank of Japan raises interest rates, Bitcoin will crash!" As the Tokyo central bank's monetary policy meeting approaches, such predictions are once again rampant in the crypto community. Yesterday, Bitcoin fell from a high of $90,000 to $85,616, with a daily drop of 5% seemingly confirming this panic.
But if we look beyond the surface to see the essence, this round of the market script may be undergoing a rewrite.
Historical Burden: Three Rate Hikes, Three Bloodbaths
The market's PTSD regarding Japan's interest rate hikes is not unfounded. After the Bank of Japan raised interest rates three times in March and July 2024, and January 2025, Bitcoin experienced a drop of over 20% each time. The most severe was in July 2024, when Bitcoin plummeted from $65,000 to $50,000, causing a total evaporation of $600 billion in the entire cryptocurrency market.
This is a typical "Yen arbitrage trading" logic: investors borrow zero-cost yen, exchange it for dollars and then invest in high-yield assets. Once Japan raises interest rates, increasing the financing cost of the yen and driving up the exchange rate, these leveraged positions must be urgently closed out to convert back to yen for debt repayment. Bitcoin, being a relatively liquid risk asset, naturally becomes the preferred "ATM".
Three abnormal signals suggest a different script.
However, this market has shown three intriguing changes:
Signal 1: Bears have "surrendered" in advance.
The reason for the market crash in July 2024 is mainly that most funds did not anticipate interest rate hikes at all, while speculative funds were still heavily shorting the yen at that time. Currently, Polymarket data shows that the probability of a 25 basis point rate hike has reached as high as 98%, and speculative funds have shifted their positions on the yen from net short to net long. This means that after the interest rate hike is implemented, the appreciation potential of the yen is limited, and there is insufficient motivation for panic short-covering.
Signal Two: The bond market has already "jumped the gun"
The yield on Japan's 10-year government bonds has surged from 1.1% at the beginning of the year to nearly 2%, reaching an 18-year high. The bond market has effectively completed a "self-help rate hike" through actual actions, and the central bank's decision may instead serve as an acknowledgment of the current situation. When policies are fully priced in by the market, their impact will inevitably be significantly reduced.
Signal 3: The US, Japan, and South Korea sing "Policy See-Saw"
At the same time that Japan may raise interest rates, the Federal Reserve has just lowered rates by 25 basis points. This policy combination of "loose in the US, tight in Japan" has avoided a synchronized tightening of global liquidity, providing a buffer for risk assets.
The "identity crisis" of Bitcoin: from a safe-haven asset to a risk chip
A deeper question is: why does Japan's interest rate hike have such a significant impact on Bitcoin?
Data shows that at the beginning of 2025, the correlation between Bitcoin and the Nasdaq 100 index reached 0.8, setting a new high since 2022. Before 2020, this figure fluctuated between -0.2 and 0.2 for many years. This indicates that Bitcoin is no longer an independent "digital gold" outside the traditional financial system, but is deeply embedded in the risk asset portfolio of Wall Street.
The launch of the spot Bitcoin ETF in the United States has accelerated this process. Institutional investors such as pension funds and hedge funds are incorporating Bitcoin into their "risk budget" management. When global liquidity tightens, they do not differentiate between Bitcoin and tech stocks, but instead reduce their positions uniformly in proportion. The relatively shallow market depth and good liquidity of Bitcoin make it the first to be impacted during the deleveraging process.
The Underlying Current of Smart Money: Who is Accumulating During the Fall?
Interestingly, on-chain data reveals a different picture. Despite the price correction, large strategic addresses holding over 10,000 BTC have been quietly increasing their holdings, while exchange reserves continue to decline, and more tokens are being transferred to cold wallets for long-term holding.
This indicates that assets are shifting from short-term traders to long-term holders, optimizing the market structure. Additionally, the expectation of yen appreciation has reduced the entry costs for domestic Japanese funds, and with the improvement of Japan's Web3 regulatory framework and deepening tax reforms, institutional dividends may be released after the liquidity shock dissipates.
The sentiment indicators in the options market have not shown extreme pessimism either. Although the demand for put options has increased, the 25-Delta risk reversal indicator has not shown panic readings, indicating that professional investors are hedging risks rather than fleeing in a hurry.
Conclusion: History does not repeat itself in a simple way, but it does follow the same rhyme.
With the Bank of Japan's shoe dropping, market attention will shift to a new balance—the tug-of-war between the liquidity injection of U.S. rate cuts and the arbitrage adjustments of Japanese rate hikes. The outcome of this game will determine the short-term trajectory of Bitcoin.
But it can be said for certain that the era of blindly following headline news for trading is over. The market always rewards those who can distinguish between signals and noise, while punishing emotionally driven speculators.
What are your thoughts on the long-term impact of Japan's interest rate hike on the crypto market? Feel free to share your insights in the comments!
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