What will happen to Bitcoin in the near future

Next week, the Bank of Japan is likely to raise the benchmark interest rate, which will make borrowing capital more expensive. Although this event does not affect financial markets as much as similar changes from the U.S. Federal Reserve, this time it is able to affect most risky assets – including crypto.

As analysts note, the increase in the base interest rate in Japan can lead to a decrease in the scale of the so-called yen curry trade, which traditionally is a key factor of global liquidity.

Cryptocurrency trader


A Japanese yen curry trade is an investment strategy based on taking advantage of low interest rates in Japan. Simply put, investors borrow in yen at a minimal interest rate, convert the funds into currencies of countries with higher rates, and invest them in yielding assets like bonds or stock markets.

The key idea behind the curry trade is to profit from the interest rate differential between countries. The Japanese Yen is traditionally a popular choice in this strategy due to the very low rates set by the Bank of Japan. However, this trade can be considered effective in a stable economic environment.


An increase in the base interest rate will make yen loans not as affordable. Which means investors around the world may scale back their own operations and reduce positions, i.e. sell certain assets.

Here’s a line on this from Marcin Kazmerczak, chief operating officer at RedStone Oracles, as quoted by The Block.

A rate hike by the Bank of Japan is certain to trigger a massive cessation of the yen carry trade, which could dampen market participants’ enthusiasm for the Trump deal [referring to traders’ attempt to capitalise on a possible industry growth on the back of Trump’s inauguration – editor’s note].

WeFi’s head of growth Agne Linge shares this view. In her view, a possible rise in the benchmark interest rate “could affect risky assets if they have to be sold to cover loans as part of a caretrade”. This could include not only equities, but also cryptocurrencies, which are popular today.

Newly elected US President Donald Trump at the Bitcoin 2024 cryptocurrency conference

Earlier, Bank of Japan Governor Kazuo Ueda voiced remarks that many perceived as hawkish, i.e. hinting at complications in the market. Bankers raised the short-term rate to 0.25 per cent in July and are now due to raise it to 0.45 per cent.

A similar situation with the yen happened in August 2024, when Bitcoin briefly collapsed below $50,000.

Here’s another line from Kazmercak.

If the Bank of Japan raises rates, it could strengthen the yen and force investors to quickly unwind positions in risky assets. Such a situation has the potential to cause a domino effect in global markets, as happened in early August 2024 when Bitcoin fell from 66k to 55k in just a week.

😈 MORE INTERESTING CAN BE FOUND AT US IN YANDEX.ZEN!

However, the expert also notes that the impact of the changes will be gradual, not abrupt, because the situation is different for each investor. That means that the positive on the background of Trump’s coming to power is still able to dominate the markets.

The key will be to watch how they balance domestic inflation targets with the stability of global markets.

What will happen to the key rate in 2025

Analysts generally expected increased volatility in Bitcoin and the cryptocurrency market in general during Trump’s inauguration. However, fresh data on the US Consumer Price Index (CPI) made it clear that the fight against inflation is proceeding at a normal pace, which may cause investors to increase their risk tolerance.


On Wednesday, it became known that the consumer price index increased by 2.9 per cent year-on-year, which matched experts' expectations. At the same time, the core CPI rose by 3.2 percent - even lower than the forecasted 3.3 percent. That is, the inflation situation was slightly better than expected.


US Federal Reserve Chairman Jerome Powell

This suggests that the US Federal Reserve will not take a tough stance, but will make at least two cuts in the base interest rate in 2025. Because of this, capital borrowing will become more affordable, which will lead to a revitalisation of investors and their investments.

Here’s what Agne Linge had to say on the subject.

With the upcoming US presidential inauguration, there is a high probability that the so-called “Trump effect” will trigger a breakout in Bitcoin’s price, bringing it close to an all-time high.


A change in Japan's benchmark interest rate does have the potential to affect the rest of the world. However, a drastic change in a single moment is likely not going to happen. Which means the positivity from Trump's rise to power could well be the main emotion in the market.


Look for more interesting stuff in our crypto chat. We look forward to seeing you there.

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