BoJ Rate Hike Expected on December 19, Bitcoin Faces Downside

• Bank of Japan is expected to raise rates by 25 basis points at the December 18-19 meeting.
• On-chain data shows exchange inflows rising and funding rates declining ahead of the event.
• Bitcoin dropped 23-30% following the previous three BoJ rate hikes in the past 18 months.

The Bank of Japan is expected to raise interest rates by 25 basis points at its December 18-19 policy meeting, which could put pressure on Bitcoin and other risk assets. Polymarket shows a 98% probability of the rate hike, with only 2% wagering policymakers will maintain current levels.

The move would take Japan’s policy rate to 75 basis points, a level not reached in nearly two decades. While modest by global standards, the shift carries weight because Japan has served as the world’s primary source of inexpensive leverage through the yen carry trade.

On-Chain Data Suggests Selling Already Underway

CryptoQuant analysis indicates Bitcoin’s downside may already be unfolding rather than materializing after the announcement. Exchange netflows show that previous BoJ hiking phases triggered sharp spikes in BTC inflows around announcements. Recent data reveal that exchange inflows have already increased ahead of the event.

This pattern suggests investors are proactively reducing spot exposure before the BoJ decision rather than reacting afterward. Funding rates display a similar trend. During past rate hikes, funding rates dropped sharply around announcements as long positions were liquidated and shorts became dominant.

Current funding rates are declining and unstable, indicating that leverage unwinding is underway. This shows pre-event caution rather than post-event panic. The BoJ’s hawkish shift has been discussed for months, with unwinding of yen carry trades and global liquidity tightening well anticipated.

Yen Remained Primary Currency People Borrowed

Analyst Mister Crypto stated that for decades, the yen served as the primary currency people borrowed and converted into other currencies and assets. That carry trade is diminishing as Japanese bond yields rise rapidly. If yields continue climbing, leveraged positions funded in yen may require unwinding, forcing investors to sell risk assets to repay debt.

Bitcoin trades at $89,000, down 2% over the seven days. However, traders focus on historical precedent following previous BoJ hikes. In March 2024, Bitcoin fell roughly 23% after a rate increase. Following the July 2024 hike, it dropped around 25%. After the January 2025 rate increase, BTC declined more than 30%.

The key question centers on whether the yen strengthens further after the announcement or whether markets react with a reversal pattern. CryptoQuant noted that both price action and on-chain indicators show adjustment is already occurring ahead of the December 19 decision.

Related: Bitcoin Faces Likely Mid-December Pullback Amid Recurring Timing Pattern