The Bank of Japan is expected to raise interest rates by 25 basis points this week.
Analysts warn the move could push Bitcoin (BTC) to $70,000.
The central bank's policy meeting begins Wednesday, with the rate decision announcement scheduled for Thursday.
Prediction markets assign a 98% probability to the rate increase, according to Polymarket data.
What Happened
The Bank of Japan is poised to raise its benchmark rate from 0.5% to 0.75%.
The increase would mark the first rate hike since January and the highest level since 1995.
Anonymous sources told Japan Times that policymakers favor the quarter-point move barring major disruptions.
The decision reflects Japan's exit from decades of ultra-low and negative interest rates.
Bitcoin has historically suffered sharp declines following Bank of Japan rate hikes.
In March 2024, Bitcoin dropped 23% after Japan raised rates by 10 basis points.
In July 2024, the cryptocurrency fell 26% following a 25-basis-point increase.
Most recently, Bitcoin plunged 31% in January after another 25-basis-point hike.
The pattern suggests a potential decline to around $70,000 if history repeats.
Bitcoin currently trades near $89,000, down from its recent high above $100,000.
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Why It Matters
Higher Japanese rates threaten the yen carry trade, a popular investment strategy.
For decades, investors borrowed cheap yen to fund purchases of higher-yielding assets like Bitcoin.
Rising borrowing costs force traders to unwind these positions by selling cryptocurrency holdings.
Japan holds the largest foreign position in U.S. government debt, making its monetary policy shifts globally significant.
Yen strength tightens worldwide liquidity conditions, which particularly impacts risk assets like Bitcoin.
However, some analysts see early warning signs that much of the impact is already priced in.
Exchange inflows have risen ahead of the announcement, suggesting proactive selling by traders.
Funding rates have collapsed, indicating leverage is being reduced before the event.
The timing coincides with a busy week for macroeconomic data.
U.S. unemployment figures and non-farm payrolls are due Tuesday.
Consumer price index data and jobless claims will arrive Thursday.
The European Central Bank also announces its rate decision this week.
Analysts advise positioning for volatility as multiple central bank decisions converge.
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