Bitcoin dropped 4% below $86,000 on Monday as markets braced for the Bank of Japan's interest rate decision this week. Economists predict another rate hike could trigger a 20% decline in the cryptocurrency, extending losses to $68,800 based on historical patterns from previous BOJ policy shifts.
What Happened: Rate Hike Predictions
An overwhelming 90% of economists—63 out of 70—surveyed between Dec. 2 and Dec. 9 forecast the BOJ will raise short-term interest rates from 0.50% to 0.75% at this week's meeting.
Historical data shows Bitcoin declined 23% following the BOJ's March 2024 rate hike, 26% after the July 2024 increase, and 31% following January's policy change. A similar 20% correction from current levels would push Bitcoin to $68,800, creating a 46% gap from its $126,000 all-time high.
Market analysts noted Japan's status as the largest holder of U.S. debt amplifies the cryptocurrency's sensitivity to BOJ policy.
Rising Japanese interest rates pull capital back to Japan, reducing dollar liquidity and triggering sales of riskier assets like Bitcoin.
On Nov. 30, confirmation of Japan's impending rate hike pushed Bitcoin to $83,000, erasing approximately $200 billion from the overall cryptocurrency market.
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Why It Matters: Multiple Pressures
Market analyst NoLimit identified China's renewed mining crackdown as an additional pressure point, with Xinjiang operations shutting down roughly 400,000 miners in December.
The Bitcoin network hashrate fell approximately 8%, forcing miners to liquidate holdings to cover operational costs or equipment relocation.
NoLimit characterized the situation as a temporary supply shock driven by regulatory decisions rather than demand shifts, noting historical patterns show the network typically adapts before Bitcoin recovers from similar crackdowns.
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