Bitcoin Defies Japan’s Rate Hike After Four Straight Crashes Since 2024

Bitcoin was supposed to crash. On June 16, the Bank of Japan raised its benchmark interest rate to 1%, the highest level since September 1995, in a move a prominent macro analyst had flagged days earlier as a fresh threat to crypto. Bitcoin dipped, then climbed back toward $66,000, breaking a pattern that had held through the previous four Bank of Japan hikes since 2024.

The analyst, who posts on X as arndxt, had warned that the real danger was never the hike itself. It was the yen carry trade behind it, the flow of cheap Japanese money that has quietly funded Bitcoin rallies, US tech stocks and emerging market bets for years. That flow held together this time. Whether it holds through Japan’s next move is the question the rest of this year will answer.

The Warning That Landed Right on Schedule

arndxt’s post landed on a Saturday, days before the Bank of Japan’s June 15 to 16 policy meeting. He argued Japan was shaping up to be one of the biggest macro risks for Bitcoin once again, and he laid out how a routine rate decision could turn into forced selling rather than a non-event.

The mechanism is the yen carry trade. For years, investors borrowed cheaply in yen and moved that money into higher yielding assets worldwide, including US tech stocks, emerging markets and Bitcoin. When Japan raises rates, that math gets worse, and some of the borrowed money has to come home.

arndxt pointed to July and August 2024 as the clearest precedent, when a Bank of Japan hike sent the yen surging, global equities lower and Bitcoin sharply down as carry trades unwound. Certain conditions, he said, make a hike especially dangerous for Bitcoin when they land together:

• A sharp rally in the yen against the dollar
• Rising Japanese government bond yields
• Elevated US Treasury yields
• Risk-off moves in Nasdaq and semiconductor stocks
• Thinning liquidity across crypto markets
• Crowded long positioning in Bitcoin

Chip stocks already showed that fragility on their own terms this year, when AI chip stocks cratered even as the Dow hit a record, exactly the kind of divergence arndxt flagged as dangerous when it lines up with a hawkish Bank of Japan.

If BOJ guidance is hawkish, USDJPY drops hard, and Nasdaq / semis weaken at the same time, then BTC could see another forced deleveraging move

arndxt wrote that line in the post mapping the exact combination that could force BTC lower, the same post that set off the current round of worry.

Four Hikes, Four Selloffs

Bitcoin’s relationship with Bank of Japan policy did not start in June. Governor Kazuo Ueda’s normalization campaign, which ended eight years of negative interest rates, produced a hike roughly every few months starting in March 2024, and Bitcoin took a hit after every one of them until this year.

The August 2024 episode was the worst by far. Japan’s Nikkei tumbled nearly 20% in a stretch that included its worst single session since 1987, a shock severe enough that regulators across the region, including South Korea’s KOSPI circuit breaker mechanism now watched against Bank of Japan risk, are still tracking the same fault line.

Each hike followed the same script until this one. Bitcoin fell, clawed back slowly, then faced the next hike with less cushion than before. June 16 was supposed to extend that streak to five.

Why Didn’t Bitcoin Crash This Time?

Bitcoin held because the Bank of Japan softened its own hawkish move. Alongside the rate increase, it paused the taper of its bond buying and pledged to keep purchasing government debt starting in 2027, capping the long-term yields that had done real damage to risk assets in past cycles. The hike itself had also been priced in for weeks, with market odds above 90% ahead of the announcement.

The decision passed 7 to 1. Governor Ueda did not vote; he was undergoing medical treatment and missed the meeting entirely. Board member Toichiro Asada dissented, arguing that risks to growth and jobs from the Middle East conflict outweighed the case for hiking into an energy shock.

The Bank of Japan’s own policy statement from the meeting said it would keep adjusting the degree of monetary accommodation depending on how prices and the Middle East situation evolve.

More importantly for traders, the bank also committed to buying about 2 trillion yen, roughly $12.5 billion at prevailing exchange rates, of government bonds a month starting in April 2027, an attempt to cap the long end of the yield curve even as short-term rates rise. Long-dated Japanese yields, not the yen itself, had been the real pressure point for global leverage in past cycles, and capping them blunted what would otherwise have been a purely hawkish surprise.

Bitcoin dipped briefly during the Asian trading session, then recovered to trade near $66,000, close to where it sat before the announcement. A day later, the Federal Reserve held rates steady under new chair Kevin Warsh, and Bitcoin drifted back toward $64,000 as attention shifted from Tokyo to Washington.

Skeptics Call the Unwind Story Overblown

Not every analyst bought the danger narrative, even before June 16. Bank for International Settlements data showed yen-denominated foreign-currency credit contracted by 4.9% during 2025, leaving the carry trade complex smaller than it was during the 2024 blowups. That data point is central to the case that the mechanism arndxt described has less fuel left than it used to.

The other side of the ledger looked more dangerous. Leveraged funds pushed short bets against the yen to more than 115,000 contracts in the week ending June 9, the largest bearish position since November 2017, according to CFTC data, meaning plenty of traders were still positioned for a weak yen right as the hike hit.

• arndxt warns a hawkish Bank of Japan combined with a sharp yen rally and weaker Nasdaq or semiconductor stocks could still force another deleveraging move in Bitcoin.
• LondonCryptoClub’s newsletter founders and analyst Cryptic Trades argue the unwind fear is overstated, since Japan kept adding to its US Treasury holdings through the spring and called the whole story a nothing burger for markets.
• Arthur Hayes, the BitMEX co-founder, says the tightening path is structurally bullish for Bitcoin long term, because Japan’s real interest rates stay negative even after nominal hikes.

A separate data study complicated the picture further. Bitcoin’s 52-week rolling correlation with the dollar-yen pair reached negative 0.90 in late June, the most negative reading since 2022, according to TradingView data cited in the analysis. The finding runs against carry trade logic, since it shows Bitcoin and the yen weakening together recently rather than moving in opposite directions, a pattern more consistent with broad dollar strength than with a direct carry trade link.

The Bond Market Is Japan’s Quieter Risk

Rate hikes are not the only lever moving Japan’s bond market. By January, Japan’s 10-year government bond yield had already climbed to around 2.12%, the highest since 1999, while the 30-year yield reached a record near 3.5%, a jump of roughly 104 and 120 basis points respectively since the start of 2026. Japan’s government approved a record budget near $780 billion for the 2026 fiscal year around the same stretch, deepening worries about deficit spending just as inflation stopped being theoretical.

Board member Naoki Tamura wants the tightening to keep going regardless of the bond market’s nerves. He said the bank should raise the policy rate “by 0.25 percentage points at intervals of a few months toward the neutral interest rate level of 2%,” and added that officials should “accelerate the pace of rate hikes without hesitation” if inflation risks intensify.

Deputy Governor Ryozo Himino echoed that stance on June 24, telling parliament, “There is a risk underlying inflation may deviate upward from our target,” in explaining the bank’s decision to lift its policy rate earlier that week.

Oxford Economics, a macroeconomic research firm, expects the central bank to resume normalization in July, though it cautions that developments in the Middle East and the yen’s value could still push that timeline back.

The Next BOJ Test Is Already on the Calendar

Traders are not pricing a repeat of June just yet. Robert, an independent markets analyst who posts on X as infraa_, laid out two scenarios this week in a thread mapping two Bank of Japan outcomes. In the first, he wrote, “BoJ announced a jumbo, unexpected hike (July odds are for a hold),” a surprise he said would squeeze the short side of the carry trade hard enough to hit Treasuries, mortgage bonds and stocks.

Wall Street is not betting on a sudden yen spike either. Goldman Sachs revised its 12-month dollar-yen forecast to 165 from 155 on July 6, one of the most bearish calls on the currency on the street, implying traders expect the yen to weaken further rather than surge the way a carry trade unwind would require.

Sentiment has not fully recovered regardless. Bitcoin’s fear and greed reading sank toward extreme fear as the price retested its February floor earlier this summer, a reminder that the carry trade was never the only thing weighing on this market.

Tamura and Himino have both said more hikes are coming. The next test of whether Bitcoin can shrug off another one is already on Japan’s calendar for later this year.

Frequently Asked Questions

What Is the Yen Carry Trade, Exactly?

The yen carry trade is a borrowing strategy, not one simple bet tied directly to Bitcoin. Multi-asset hedge funds and macro desks often run equities, currencies, bonds and crypto exposure as a single book, funding parts of it through yen loans or FX swaps that never look like a straightforward short against the yen. When funding costs rise, prime brokers demand more collateral across that whole book, and Bitcoin, held through futures or listed products, can get sold along with everything else.

Has Japan’s Crypto Market Kept Growing Despite the Hikes?

Japan’s domestic crypto exchange market was worth an estimated $3.66 billion in 2025 and is projected to grow past $28 billion by 2034, according to market research firm IMARC. Regulation has moved alongside that growth. Japan’s lower house passed legislation on June 11 to treat digital assets more like securities, tightening oversight even as the rate hikes reshape the funding side of the market.

What Does Arthur Hayes Think Bitcoin Will Do Next?

Arthur Hayes, the BitMEX co-founder, argues the Bank of Japan’s tightening path is bullish for Bitcoin over the long run. His reasoning centers on Japan’s real interest rates staying negative even after nominal hikes, since inflation still outpaces what savers earn, a dynamic he expects to weaken the yen further and push capital toward hard assets like Bitcoin rather than away from them.

Could the BOJ Still Trigger a Carry Trade Unwind Later in 2026?

Yes, and Bank of Japan officials say that is the plan. Board member Naoki Tamura has called for hikes at intervals of a few months until the policy rate reaches a neutral level near 2%, more than double where it sits now. Each additional move tightens the gap that makes yen borrowing attractive, and analysts including arndxt say the risk resurfaces any time a hike lands alongside a sharp yen rally or fresh weakness in US tech stocks.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrency and foreign exchange markets are highly volatile and carry a significant risk of loss. Consult a licensed financial advisor before making investment decisions. Figures are accurate as of publication on July 10, 2026.