BOJ Rate Decision Imminent: Crypto Market Faces $643 Million Liquidation Risk

Source: TokocryptoBlog
Original Title: Ahead of the BOJ Interest Rate Decision on December 18, How Will the Crypto Market Respond?
Original Link: https://news.tokocrypto.com/jelang-keputusan-suku-bunga-boj-18-desember-respons-pasar-kripto/

Background: On the Eve of the BOJ Rate Decision

As the Bank of Japan (BOJ) is set to hold an important interest rate decision meeting on December 18-19, the crypto market is once again experiencing a wave of large-scale liquidations. According to prediction market data, participants currently assess a 57% probability that the BOJ will raise rates at this month’s meeting, reflecting the influence of a series of hawkish signals from BOJ Governor Kazuo Ueda. The current BOJ benchmark rate remains at 0.5%.

Large-Scale Forced Liquidations

According to CoinGlass data, on December 1, forced liquidations reached approximately $643 million, affecting 218,844 traders. Among these:

• Long positions (betting on price increases): about $567 million
• Short positions (betting on price decreases): about $69 million

Bitcoin was the most heavily impacted, with about $186 million liquidated, followed by Ethereum at around $138 million. This pattern indicates that most market participants had previously bet on further cryptocurrency price increases, but sudden selling pressure triggered mass stop-losses.

Japanese Bond Yields Hit 15-Year High

On December 1, Japan’s 10-year government bond yield soared to around 1.86%, the highest level since April 2008. This rise reflects market concerns that the BOJ is gradually shifting toward a more hawkish monetary policy stance after years of ultra-loose policy.

In a December 1 speech to Nagoya business leaders, Kazuo Ueda stated that the BOJ is “actively gathering corporate attitudes toward wage increases” in preparation for the December 18-19 meeting. This was widely interpreted as a signal that, if wage and inflation pressures intensify, the central bank may be open to further tightening.

The BOJ previously raised its benchmark rate from 0.25% to 0.5% in January. A potential rate hike in December would be the second this year.

Yen Carry Trades Under Threat

The prospect of rising BOJ rates is also putting pressure on the popular investment strategy known as the yen carry trade. For years, global investors have borrowed yen at ultra-low rates and used those funds to invest in higher-yielding assets, including US stocks, European bonds, and crypto assets.

If Japanese rates rise and the yen appreciates, the appeal of this strategy would drop sharply. Investors may be forced to close positions financed by yen loans, triggering selloffs across multiple asset classes—including cryptocurrencies.

The USD/JPY exchange rate traded at 156.58 on November 21. Historically, when the rate approaches 160, Japanese authorities often consider intervention to prevent further yen depreciation. If a BOJ rate hike drives further yen appreciation, pressure to unwind yen carry trades may increase, potentially triggering another round of liquidations in risk assets and highly leveraged markets such as crypto.

Market Assessment of BOJ Rate Hike Probability

In derivatives and prediction markets, participants now view a 25 basis point BOJ rate hike in December as slightly more likely than a hold.

After Kazuo Ueda’s December 1 speech, the implied probability of a hike on Polymarket rose from about 50% to 57%. Meanwhile, the probability of the BOJ holding rates at 0.5% is estimated at about 40%.

Developments ahead of the December 18-19 BOJ meeting have become a key focus for global market participants. Any new signals regarding Japan’s rate policy could spark further volatility, impacting not only bond and forex markets but also the highly leveraged crypto market.