What does Bank of Japan’s Hike mean for Crypto? Can BTC Dump 30% more?

The Bank of Japan (BOJ) has increased interest rates by 25 basis points to 0.75, the highest level in almost thirty years. The relocation, which is meant to address the long-standing inflation, has led to new volatility in the international financial markets like Bitcoin and the entire crypto industry. As the historical data indicate, Bitcoin experienced sharp corrections after the last hikes of the Bank of Japan rates, investors are now doubting that the BTC might be subjected to a 20-30% pullback again.

Bank of Japan Delivers Second Rate Hike of the Year

The recent move by the Bank of Japan is the second rate increase in 2025 after the January increase of 25 bps. According to the words of Bank of Japan Governor Kazuo Ueda, the move was unanimously supported by the policymakers because they felt confident about the economic prospects of Japan.

The central bank pointed out that real interest rates will still be deep negative even with the increase as the central bank indicated it would maintain accommodative financial conditions that will promote economic growth. Authorities also indicated a willingness to raise rates further in the coming year in case inflation is still high.

Yen Weakness Limits Carry Trade Unwind

The Japanese yen further devalued after the announcement, trading close to 156 to the US dollar. The rate increase was widely anticipated in the markets, and it mitigated the risk of an unwind of a large-scale yen carry trade which would be a significant determinant of stressing risk assets such as Bitcoin in the past.

In the meantime, the US financial markets responded with an increase in yields and a strengthening the dollar. US 10-year Treasury yield increased to approximately 4.14% and the US Dollar Index (DXY), increased to about 98.5, as investors re-evaluated their Federal Reserve rate cut expectations in the face of declining inflation.

Is a Massive 30% Bitcoin Pullback Ahead?

The behavior of Bitcoin in response to the earlier hikes in the rates by the Bank of Japan has been quite bearish. BTC has witnessed losses of between 23% to 31% since 2024 following parallel policy actions, and this was mostly due to the unwinding of the yen-funded carry trades. Most prominently, following the January 2025 Bank of Japan rate increase, Bitcoin dropped to almost 31%.

As Bitcoin is currently between $85,000 and $88,000, there are analysts who predict that history may repeat itself. The same post-hike adjustment would push BTC to below the $70,000 mark in case of an increase in the selling pressure. A proven breakout of the zone of support of $85,100 can enhance negative impulse.

BTC Price Outlook: $81,000 Dump or $93,000 Spike?

BTC is now trading in a downward channel with support levels of about $84,500 and resistance levels of about $90,000. At the moment of writing, BTC is traded at the price of $87,745, shifting in this downward channel, which indicates that the overall market bias is still bearish in case the price does not violate the boundaries of the channels.

BTC?USDT H1 chart, analyzed by Ali Oliyaee, published on TradingView, December 19, 2025

A downside break under the support of $84,500 would result in the next downside target of approximately $83,900. A prolonged dip below these levels would clear the way to a more serious drop to $81,000. On the upside, in case BTC can recover and overcome the resistance at the $90,000 level, it would cancel the immediate bearish formation and may cause a shift to the next resistance point at $93,500.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments are highly volatile and risky. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions.