Revisiting $85,000: Bitcoin Price Drop Linked To Japanese Government Bonds
Overview
Bitcoin’s price has recently experienced a notable decline, dropping towards the $85,000 mark after a brief period of consolidation and a rise to approximately $93,000. This downturn has been linked to developments in the Japanese government bond market, which have implications for global financial conditions.
What Happened?
Following a bullish uptick to around $93,000 at the end of last week, Bitcoin’s price fell by 7% on Monday, leading to speculation about the underlying causes. Market expert Shanaka Anslem identified rising yields on Japanese government bonds as a significant factor contributing to this decline.
On December 1, 2025, the yield on Japan’s 10-year bonds reached its highest level since June 2008, while the 2-year yield hit a benchmark not seen since before the collapse of Lehman Brothers. These rising yields have prompted a significant unwinding of the Yen Carry Trade, which is considered one of the largest arbitrage trades in history, with estimates of its size ranging from $3.4 trillion to nearly $20 trillion. This trade enabled global investors to borrow Japanese yen at low costs to invest in various assets, including Bitcoin.
As yields increase, the yen strengthens, which can lead to unprofitable leveraged positions. This situation can trigger a chain reaction of selling, resulting in margin calls and further liquidations. On October 10, a record $19 billion in crypto positions were liquidated in a single day. By November, Bitcoin exchange-traded funds (ETFs) experienced an outflow of $3.45 billion, including a $2.34 billion loss from BlackRock’s IBIT. An additional $646 million was liquidated on December 1 alone before lunchtime.
The correlation between Bitcoin’s price and major stock indices has also shifted, with a 46% correlation with the Nasdaq and a 42% correlation with the S&P 500. This change indicates that Bitcoin, once viewed as an uncorrelated hedge, is now acting as a leveraged indicator of global liquidity conditions.
Despite the drop in Bitcoin’s price, whale investors accumulated 375,000 BTC during this period, while miners significantly reduced their selling, cutting monthly sales from 23,000 BTC to just 3,672. Looking ahead, a key event is set for December 18, when the Bank of Japan will announce its policy decision.
Impact on the Crypto Market
- Bitcoin’s price decline highlights the influence of macroeconomic factors, particularly in the bond market.
- The unwinding of the Yen Carry Trade could lead to further volatility in the cryptocurrency market.
- Record liquidations in crypto positions indicate heightened risk and sensitivity to market movements.
- The correlation with major stock indices suggests that Bitcoin is increasingly viewed as part of broader financial market dynamics.
- Whale accumulation and reduced miner selling may indicate underlying support for Bitcoin despite the price drop.
Updated: 12/2/2025, 8:35:15 AM
