Bitcoin is again trading under the shadow of a potential yen carry-trade shock 
as markets head into the 9–10 December FOMC meeting and a likely hawkish turn 
from the Bank of Japan at the December 18-19 meeting. The setup echoes last 
summer’s episode, when a policy shift in Tokyo triggered rapid deleveraging 
across risk assets, including crypto. Will The Bitcoin Price Crash Next Week? 
Analyst Benjamin Cowen explicitly links today’s environment to that July 
shock. He reminded followers that “in July 2024, the Fed cut rates while the 
BOJ raised rates, leading to the unwind of the carry trade. Bitcoin 
capitulated into it, and found a low 1 week later.” He added, “Good chance 
this happens again on December 10th (Fed cuts, BOJ raises rates). So maybe 
Bitcoin finds a low mid-Dec?” The precise sequencing last year was more 
nuanced – markets aggressively priced Fed easing while the BoJ surprised with 
a hike – but the core mechanism Cowen highlights is the same: when US policy 
is moving toward looser conditions just as Japan tightens, the long-running 
yen carry trade becomes unstable and high-beta assets sell off hard. Related 
Reading: Bitcoin Signals Bear Market: One Thing Could Flip It, Says 
CryptoQuant CEO Truflation’s thread lays out why this matters for Bitcoin and 
the wider crypto market. Large institutions and commercial banks “borrow money 
in Yen where interest rates are historically and famously low, and use that 
money to invest in the US.” They can park the funds in interest-bearing 
instruments to “earn healthy 3–4%” on the spread, or “more often, they invest 
in stocks and bonds to get way more.” This is reinforced by a BoJ policy of 
keeping the yen cheap against the dollar. The danger arises when stocks fall 
and the yen starts to rise or is expected to rise. Then “institutional and 
Commercial borrowers may exit, so as not to get stuck with significant losses 
on their Yen debts.” They “sell whatever assets they purchased in the US and 
get back into Yen to pay back their loans in Japan, resulting in a cascade of 
US asset sales and Yen purchases.” After “years of Yen carry trade being a 
relatively safe way for big banks and institutional investors to make easy 
money,” even a modest normalization can force broad, mechanical de-risking — 
and Bitcoin, as a liquid, leveraged risk asset, sits directly in that firing 
line. Crypto trader Kevin (@Kev_Capital_TA) underscores how tight the current 
window is. He notes that “we have the Fed&#8217;s preferred measure to track 
inflation via the Core PCE inflation and then the FOMC all in the next six 
days,” followed by a BoJ press conference on 19 December that will be “massive 
for Dollar, short end and long end of the yield curve not to mention Yen carry 
trade fears.” In a separate post, he stresses that “the JP10Y continues to 
make new highs. Pretty big deal folks,” highlighting that Japanese yields are 
grinding higher into that meeting and increasing pressure on the BoJ to act. 
Related Reading: US Sen. Lummis Hints At US Bitcoin Buy With ‘Franklin’ Meme A 
few days ago, BitMEX founder Arthur Hayes connected that macro repricing 
directly to Bitcoin’s latest leg down. “BTC dumped cause BOJ put Dec rate hike 
in play. USDJPY 155–160 makes BOJ hawkish,” he argues, framing the sell-off as 
a funding shock rather than a crypto-native event. Into December, futures and 
economist surveys put the probability of a Fed cut at roughly 80–87% for the 
9–10 December meeting, even as the committee remains divided. At the same 
time, the BoJ is openly signalling it will “consider the pros and cons” of a 
hike at its 18–19 December meeting, with markets now pricing a high likelihood 
of tightening and 10-year JGB yields near multi-decade highs. That combination 
— Fed easing expectations plus BoJ tightening risk — is exactly the 
configuration that threatens the yen carry and makes a repeat of July 2024’s 
pattern plausible: a sharp flush in Bitcoin and other risk assets, followed by 
a bottom once forced deleveraging runs its course. At press time, BTC traded 
at $92,235. Featured image created with DALL.E, chart from TradingView.com

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