Writing date: 2025-12-16

Conclusion in one sentence: Cryptocurrency is not determined by 'Japanese interest rates', but by global liquidity and leverage; as the yen has long been one of the global financing currencies, once the BOJ's rate hike expectations strengthen, and the yen strengthens/volatility increases, it will trigger 'carry unwind + deleveraging'. Assets like cryptocurrency, with high beta, strong liquidation mechanisms, and 24/7 trading, are often the first to be sold off, and their declines can also be easily magnified.

0) What happened today

Reuters reports: The market generally expects the Bank of Japan (BOJ) to raise the policy interest rate to 0.75% this Friday (12/19), reaching about a 30-year high, and may hint at further gradual rate hikes depending on inflation and wages.

At the same time, Japan also passed a large supplementary budget, adding to rising bond yields, making the market more sensitive to the "fiscal + monetary combination".

Source: Reuters (2025-12-16)

Global risk sentiment is defensive: Reuters' "Global Market Overview" pointed out that investors are more cautious before important economic data and central bank meetings; crypto also weakens accordingly, with Bitcoin falling to a two-week low.

Source: Reuters (2025-12-16)

As of the time of writing, BTC and ETH have shown significant daily volatility:

BTC: **$87,210**, daily low $85,374

ETH: **$2,951.88**, daily low $2,895.63

Source: Market data (tool quotes)

With the decline, leverage liquidation appears at the "hundreds of millions of dollars" level: Decrypt cites CoinGlass data stating that about $573M has been liquidated in the past 24 hours (with longs taking the majority), among which BTC/ETH liquidation amounts are at the forefront.

Source: Decrypt (2025-12-16)

Note: Liquidation statistics will roll over with time (the "past 24 hours" changes every minute), and different media capture different time points, leading to discrepancies in the numbers.

1) First, clarify: what is "Yen carry trade"

The core idea is simple:

Borrow currency with a lower interest rate (historically, it has often been Yen), exchange for higher interest/riskier assets to invest in, earning "interest spread + risk asset appreciation".

Reuters' classic explanation of carry trade is:

Borrow Yen (or other low-interest currencies)

Exchange for high-yield currencies/assets (USD assets, Mexican pesos, New Zealand dollars, etc., which can also include stocks, credit, crypto, and other risk assets)

Profits come from: interest spread and asset appreciation

Source: Reuters explainer (2024-08-07)

In one sentence, turn it into "global financing power":

The lower the Yen interest rate, the cheaper it is to borrow Yen, and the global risk appetite is more easily magnified by leverage.

2) Why does the "BOJ rate hike expectation" make risk assets tremble together?

Because the yield structure of carry trade is extremely sensitive to two things: interest spread and exchange rate volatility.

2.1 Profit comes from "interest spread", but losses come faster from "exchange rate reversal"

Express the approximate yield of carry trade as a formula:

Total return ≈ (target asset return) + (interest spread) − (Yen appreciation) − (financing costs and friction)

When the BOJ releases stronger rate hike signals, the market will first experience two things:

The Yen may strengthen (or the expectation of strengthening becomes stronger)

Exchange rate volatility rises (risk management requires higher margins/lower leverage)

This will make the strategy of "borrowing Yen to buy risk assets" unprofitable, leading to liquidation: sell risk assets → exchange for Yen → pay debts.

2.2 The selling pressure of "liquidation" comes from risk control and the funding chain, not from the fundamentals

Many people ask: "What does the Japanese rate hike have to do with BTC?"

A more accurate answer is: "Japanese rate hikes will affect financing costs and exchange rates, while leveraged funds will reduce risk exposure globally to control risks."

Reuters has also repeatedly reminded: when USDJPY is around 155, and the scale of arbitrage accumulates, once triggering conditions change, there is a sudden risk of carry unwind.

3) Why is crypto more sensitive to "Yen interest rates/Yen strengthening"?

Reasons can be divided into three levels: asset attributes, market structure, and trading time.

3.1 Asset attributes: Crypto is usually a "high Beta risk asset"

In a risk-off phase, institutions/leverage funds will prioritize cutting high volatility, highly correlated, and valuation elastic positions. Crypto is often on the "first to be reduced" end.

(This does not mean that crypto has "no value", but rather that its volatility attributes determine that it is more easily prioritized for reduction in risk control systems.)

3.2 Market structure: perpetual contracts turn "de-leveraging" into a waterfall

The liquidation mechanism in the crypto derivatives market is highly automated. Once the price reaches the margin threshold, it triggers forced liquidation sell orders, forming a typical chain reaction:

Fall a little → forced liquidation sell → fall again → more forced liquidation

This is also why the same macro shocks often manifest in crypto as "sharper and more sudden".

Today's liquidation statistics are a reality annotation (hundreds of millions of dollars level, with longs taking the majority).

3.3 Trading time: Crypto operates 24/7, making it the "first pressure valve" for macro shocks

When macro expectations change during the Asian session (e.g., BOJ, Yen, JGB), the crypto market often prices in emotions more quickly.

Until the European and American markets open, risk sentiment further spreads to other assets.

4) An example of "30 seconds of calculation"

Assuming a certain fund uses Yen to finance the purchase of risk assets (BTC/U.S. stocks are the same):

Borrow ¥1 billion, annual financing cost 0.5%

When USDJPY=155, exchange for about $6.45M (1 billion/155)

Buy BTC or a basket of risk assets

If the BOJ rate hike expectation strengthens, it leads to:

USDJPY from 155 → 150 (Yen strengthening), similarly, $6.45M exchanged for Yen only remains ¥968 million (loss of about ¥32 million, excluding others)

At the same time, financing costs rise, volatility rises, and risk control increases margin requirements

What is the most natural action for funds?

Sell risk assets, exchange for Yen, pay off loans, and reduce leverage.

This is the "true source of selling pressure" of carry unwind.

5) What indicators should you observe next?

Macroeconomic side:

BOJ 12/19 meeting results: whether it is expected to be raised to 0.75%, and the wording of the press conference regarding the "subsequent pace" (hawkish/dovish).

USDJPY: Is there a rapid decline (Yen strengthening), and is volatility rising?

Japanese government bond yield (JGB): whether it continues to rise (Reuters mentioned the background of rising yields and market tension).

Crypto side:

Funding rate: If the rate remains positive after a decline and OI rises again, it indicates that leverage has piled back up, increasing the risk of a secondary crash.

Open interest (OI): OI rises while prices fall, often indicating "leveraging and catching knives".

Liquidation data: see if it is "long squeeze" or "short squeeze", and where it is concentrated among exchanges/coins (crowding degree).

6) "Risk warning"

Macro event week, leverage is the primary risk source: whether you are bullish or bearish, managing leverage is more important than guessing direction.

Don't mistake "macro shocks" for "fundamental collapse": Many times it is just liquidity and position structure rebalancing.

Understand the "trigger" and "amplifier": the trigger is BOJ/Yen/data expectations, and the amplifier is perpetual liquidation and crowded leverage.

Reference materials

Reuters (2025-12-16): BOJ may raise interest rates to 0.75% (30-year high)

Reuters (2025-12-16): Japan passes large-scale supplementary budget; background of rising yields

Reuters (2025-12-16): Global market risk-off, BTC weakens

Reuters explainer (2024-08-07): What is Yen carry trade

Reuters (2025-12-04): Weak Yen and carry unwind risk warning (USDJPY around 155)

Decrypt (2025-12-16): Referencing CoinGlass's liquidation data standards

Market data: Current prices of BTC/ETH and daily highs and lows