Bitcoin (BTC) Slips as BoJ Rate Hike Fears Pressure Risk Assets

Bitcoin (BTC) faces the risk of a second weekly loss as the Bank of Japan’s looming monetary policy decision left investors cautious.

10-year Japanese Government Bond (JGB) yields climbed to their highest level since April 2007.  Rising expectations of a BoJ rate hike sent yields higher, exposing BTC to downside risks.

BTC climbed to a high of $95,739 on Tuesday, December 9, before falling to a Thursday, December 11, low of $89,374. Expectations of a December BoJ rate hike clashed with a hawkish Fed rate cut, sending BTC below $90,000.

Meanwhile, US BTC-spot ETF demand rebounded in the week, providing much-needed price support, leaving BTC down 0.07% this week.

Despite the choppy week, robust institutional demand supports a cautiously bullish short-term outlook.

Below, I consider the key drivers behind recent price trends, the short-term outlook, the medium-term trajectory, and the key technical levels traders should watch.

US BTC-Spot ETF Demand Rebounds

The US BTC-spot ETF market saw net inflows of $286.6 million in the reporting week ending December 12. Inflows for the week reversed outflows of $87.7 million from the previous week, delivering price support at $90,000.

Key flow trends for the week included:

• iShares Bitcoin Trust (IBIT) reported net inflows of $214.1 million.
• Fidelity Wise Origin Bitcoin Fund (FBTC) had net inflows of $84.5 million.
• ARK 21Shares Bitcoin ETF (ARKB) saw net inflows of $24.6 million.
• In total, seven of the eleven issuers reported net inflows while three had net outflows.

BTC-spot ETF flow trends remain crucial for the supply-demand balance. US BTC-spot ETF issuers saw $3.47 billion in net outflows in November, leaving BTC with a 17.42% loss for the month. Meanwhile, BTC has fallen just 0.13% in December, on net inflows of $198.9 million.

The rebound in demand for BTC-spot ETFs supports a bullish short- to medium-term outlook for BTC, as the market focus shifts to key US economic data and the Bank of Japan.

Bank of Japan Rate Hikes and Yen Carry Trade Unwind Risks

On Friday, December 19, the Bank of Japan will announce its final monetary policy decision of 2025. Economists expect the BoJ to raise interest rates by 25 basis points to 0.75%.

Following the Fed’s 25-basis-point rate cut, a 25-basis-point BoJ rate hike would narrow the rate differential to the 2.75% – 3.00% range. While the narrower differential would be less profitable, it would still be attractive for yen carry trades into risk assets.

However, a 25-basis-point BoJ rate hike and signals of further rate cuts in 2026 to reach monetary policy normalization would narrow rate differentials further. A jump in 10-year JGB yields and a stronger Japanese yen could trigger a yen carry trade unwind, similar to mid-2024. BTC plunged 17.4% in the days after the BoJ raised interest rates and cut JGB purchases on July 31, 2024.

Notably, JGB yields and BTC price trends have had an inverse correlation since August, underscoring price sensitivity to the BoJ’s rate path.

A hawkish BoJ rate hike would likely derail the short-term bullish outlook. The BoJ’s consensus on the neutral interest rate could be crucial for BTC. A 1% neutral rate would signal one further rate cut, fueling yen carry trades. However, a 1.5% to 2.0% neutral rate would signal multiple BoJ rate hikes, which would likely trigger a yen carry trade unwind. A 17.4% drop would send BTC toward $75,000, its lowest level since April 2025.

Downside Risks: A Hawkish BoJ, US Data, and ETF Outflows

While spot ETF inflows lifted sentiment, downside risks linger, including:

• A BoJ rate hike, with warnings of further monetary policy tightening in 2026.
• Hotter US inflation and stronger jobs data curb March Fed rate cut bets. The US Jobs Report and CPI Report are out on Tuesday, December 16, and Thursday, December 19, respectively.
• BTC-spot ETFs face renewed outflows.

These scenarios would likely push BTC below $90,000, exposing the November 21 low of $80,523.

However, a less dovish Fed would likely ease carry trade unwind risks and bolster demand for BTC-spot ETFs, supporting a near-term move to $95,000.

In summary, the short-term outlook remains cautiously bullish as fundamentals outweigh the technicals. The medium- to longer-term outlook is constructive.

Technical Analysis

Despite reclaiming the $90,000 handle, BTC remained below the 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bearish bias. However, fundamentals are beginning to diverge from the technical trend, suggesting a potential upswing.

A breakout above the $94,447 resistance level would open the door to retesting the 50-day EMA. A sustained move above the 50-day EMA would enable the bulls to target the $100,000 psychological resistance level. Significantly, a sustained breakout above the 50-day EMA would signal a bullish trend reversal, aligning with the bullish short- to medium-term price outlook.

Bullish Structure: What Happens if BTC Holds $90,000?

Holding above the $90,000 level would support a move toward the upper trendline. A breakout from the upper trend line would affirm the bullish short-term (1-4 weeks) target of $95,000 and the medium-term (4-8 weeks) target of $100,000.

However, a break below the November low of $80,523 on November 21 would invalidate the medium-term bullish structure.

Track BTC market trends with our real-time data and insights here.

Outlook: $90,000 Support Key to Short-Term Outlook

US economic data, market bets on a March Fed rate cut, and the BoJ’s monetary policy decision will be key drivers in the week ahead.

However, robust demand for BTC-spot ETFs would likely cushion the downside. The mid-2024 carry trade unwind resulted from a hawkish BoJ and a dovish Fed. Ongoing expectations of a single 2026 Fed rate cut and cautious BoJ forward guidance are likely to buffer BTC from the impact of a BoJ rate hike.

Stay informed on BTC trends by monitoring macroeconomic developments, ETF flows, and technical indicators here.