Ahead of the BOJ Interest Rate Decision on December 18, the Crypto Market Rocked by US$$643 Million Liquidation

Source: TokocryptoBlog Original Title: Ahead of BOJ Interest Rate Decision on December 18, Crypto Market Response? Original Link: https://news.tokocrypto.com/jelang-keputusan-suku-bunga-boj-18-desember-respons-pasar-kripto/ Ahead of the Bank of Japan’s (BOJ) crucial interest rate decision on December 18–19, the crypto market was once again shaken by a massive wave of liquidations totaling around US$643 million on December 1.

According to data from the prediction market platform Polymarket, market participants now estimate a 57% chance of a BOJ interest rate hike at this month’s meeting, following a series of hawkish signals from BOJ Governor Kazuo Ueda. Currently, the BOJ’s benchmark interest rate stands at around 0.5%.

Forced Liquidations Reach US$643 Million

CoinGlass data shows that forced liquidations of crypto positions reached around US$643 million on December 1. During this period, a total of 218,844 traders were affected by these position clearings.

Most of those swept away were long positions (betting on price increases) with a value of around US$567 million. Meanwhile, short positions (betting on price decreases) accounted for only around US$69 million.

Bitcoin was the most impacted asset, with liquidations of around US$186 million, followed by Ethereum at around US$138 million. This pattern shows that most market participants had previously bet on continued crypto price increases when sudden selling pressure struck.

Japanese Bond Yields Highest Since 2008

Market participants linked this crypto turmoil to shifting expectations regarding Japan’s monetary policy. The yield (yield) on 10-year Japanese government bonds surged to around 1.86% on December 1, the highest level since April 2008.

This yield increase reflects market concerns that the BOJ is moving closer to a tighter monetary stance after years of maintaining ultra-loose policy.

In a speech to business leaders in Nagoya on December 1, Governor Kazuo Ueda stated that the BOJ is “actively gathering information on companies’ attitudes toward wage increases” ahead of the December 18–19 meeting. This statement was seen as a signal that the central bank is open to further tightening if wage and inflation pressures mount.

The BOJ previously doubled its benchmark rate from 0.25% to 0.5% in January, so a potential December hike would be the second this year.

Yen Carry Trade Threatened

The potential for a Japanese interest rate hike also puts pressure on a popular investment strategy known as the yen carry trade. For years, global investors have borrowed yen at very low interest rates to channel funds into higher-yielding assets such as US stocks, European bonds, and even crypto assets.

If Japanese interest rates rise and the yen strengthens, this strategy becomes less attractive. Investors may be forced to close positions financed with yen loans, triggering sell-offs across various asset classes, including crypto.

The USD/JPY exchange rate was recorded at around 156.58 on November 21. History shows that when the exchange rate approaches 160 per dollar, Japanese authorities often consider intervention to stem yen depreciation. If a BOJ rate hike triggers further yen strengthening, pressure to unwind carry trades could increase and spark another wave of liquidations in risk and highly leveraged markets like crypto.

Chances of a BOJ Interest Rate Hike

In derivatives and prediction markets, participants are now factoring in a 25 basis point BOJ rate hike in December as a slightly more likely scenario than no policy change.

After Ueda’s December 1 speech, the probability of a rate hike reflected on Polymarket moved from around 50% to 57%. On the other hand, the odds of the BOJ keeping rates at 0.5% are estimated at around 40%.

Developments ahead of the BOJ’s December 18–19 meeting are now one of the key factors monitored by global market participants. Any new signals regarding Japanese interest rate policy could trigger further volatility, not only in bond and foreign exchange markets, but also in the highly leveraged crypto market.