Market data indicate that the Bank of Japan has begun policy normalization, delivering multiple rate hikes in the cycle. For decades, Japan has been a key source of liquidity, supported by a NIRP regime and an ultra-loose stance, effectively acting as a cheap funding ATM for the financial system. Consequently, Tokyo’s tightening tends to drain liquidity globally, and Bitcoin has corrected after such moves, with declines near 23.06%, 26.61%, and 31.89% in episodes. The question is whether the shift will repeat or diverge from patterns.

With expectations for the latest BOJ action largely priced in, volatility may ease, yet the liquidity channel remains a driver for the crypto market. Traders should monitor policy messaging, rate differentials, and macro data for signs of tightening, as Bitcoin and other assets tend to reflect funding costs. By tracking these liquidity dynamics, investors can assess downside risk and position prudently amid evolving market conditions.