Bitcoin shrugged off Japan’s rate hike – The bigger liquidity test came from Washington
The Bank of Japan raised rates to 1%, the highest since 1995, marking another step away from decades of ultra-cheap money. Unlike prior hikes that triggered sharp Bitcoin selloffs, this move did not break the market: Bitcoin briefly dipped in Asia, then recovered near $66,000. The difference was that the hike was largely expected and paired with a pause in bond-buying tapering, which helped cap long-term yield pressure. Japan matters to crypto because low-yield yen funding has long powered the carry trade into Bitcoin and other risk assets. Higher Japanese rates can strengthen the yen, unwind leveraged positions, and force broad selling. That risk remains if tightening continues, though the carry-trade pool is now smaller than in 2024. The bigger immediate drag on Bitcoin came from the U.S. Federal Reserve, which turned less dovish and raised its inflation outlook, helping push Bitcoin back toward $64,000. Japan’s move was manageable; the broader liquidity backdrop still looks tighter.
