On 19 December 2025, the Bank of Japan (BOJ) decided to raise the short-term interest rate by 25 basis points, reaching 0.75% – highest since 1995. This change, in line with market expectations, represents a further step towards normalisation of monetary policy in Japan, following an earlier increase in rates in January 2025. This decision aims at combating inflation and stabilising the economy, but at the same time raises concerns about global financial markets, including the cryptocurrency sector.
Market reactions Cryptovalut
BOJ's decision sparked immediate turbulence in the cryptocurrency market, where investors feared the impact on the global liquidity associated with the yen. Bitcoin, the flagship cryptocurrency, initially fell below $86,000, which was a reaction to closing positions based on cheap yen. However, it quickly rebounded, exceeding US$87,000, which was an increase of about 0.8% in 24 hours. Similarly, Ethernum, the second largest cryptocurrency, recorded growths, driven by improved moods in Asian stocks and softening financial conditions.
The cryptocurrency markets showed relief as the increase was fully valued, thus avoiding greater shock. Nevertheless, historical data indicate that similar cycles of BOJ increases involved the fall of Bitcoin by 20-30%.
Possible Further Screenplays
The future of the cryptocurrency market in the context of the BOJ decision depends on several factors, including the global monetary policy (e.g. Fed actions) and the power of the yen. Here are two main scenarios:
- Bullish Screenplay: If the increase is insignificant and does not hinder the global appetite for risk, the cryptocurrency market may continue to increase prices. A weaker yen could support liquidity, driving investments in risky assets like Bitcoin and Ethernum. In combination with the soft CPI inflation results in the US, Crypto could test new peaks, such as Bitcoin above $90 000. Institutional investors, seeing the accumulation, could strengthen this trend.
- Bearish script (Relegated): Strengthening monetary policy in Japan could reduce global liquidity, leading to a sale of risk assets. History shows that BOJ increases often coincide with corrections in the cryptic market, potentially causing declines of 20-30%. If yen strengthens and investors close more positions, Bitcoin could fall below $85,000.
