Why Bitcoin Traders Fear A Repeat Of July 2024’s Crash Next Week

Overview

Bitcoin is facing potential volatility as it approaches the December 9–10 Federal Open Market Committee (FOMC) meeting and the anticipated hawkish stance from the Bank of Japan (BoJ) at its meeting on December 18–19. This situation draws parallels to the market conditions experienced in July 2024, when a policy shift in Japan led to significant deleveraging across various risk assets, including cryptocurrencies.

Current Market Conditions

Analyst Benjamin Cowen has highlighted the similarities between the current environment and the events of July 2024. He noted that during that time, the Federal Reserve cut interest rates while the BoJ raised them, which resulted in the unwinding of the yen carry trade. This led to a capitulation in Bitcoin’s price, reaching a low shortly thereafter. Cowen suggests that a similar scenario could unfold around December 10, with the Fed potentially cutting rates while the BoJ raises them.

The mechanics of this situation involve a long-standing yen carry trade, where large institutions and commercial banks borrow money in yen—where interest rates are low—and invest in the U.S. markets. These entities can earn a spread by parking funds in interest-bearing instruments or investing in riskier assets like stocks and bonds. However, this strategy becomes precarious when U.S. stocks decline and the yen’s value rises, prompting borrowers to exit their positions to avoid losses on their yen-denominated debts. This can lead to a cascade of asset sales in the U.S. as these institutions convert their holdings back to yen to repay their loans.

Crypto trader Kevin has emphasized the narrow timeframe leading up to the FOMC meeting, noting the importance of the upcoming Core Personal Consumption Expenditures (PCE) inflation measure. He also pointed out that the BoJ’s press conference on December 19 will be critical for the dollar and the yield curve, particularly in the context of yen carry trade concerns.

BitMEX founder Arthur Hayes has connected the macroeconomic factors at play to Bitcoin’s recent price decline. He attributed the drop in Bitcoin’s value to the BoJ signaling a potential interest rate hike, framing the situation as a funding shock rather than a crypto-specific issue. Market expectations for the Fed’s December meeting indicate a high probability of a rate cut, while the BoJ is considering tightening measures, setting the stage for potential market turbulence.

Impact on the crypto market

• Bitcoin’s price could experience significant volatility in response to the upcoming FOMC and BoJ meetings.
• A repeat of the July 2024 market conditions could lead to rapid deleveraging across risk assets, including cryptocurrencies.
• Institutional investors may exit positions to mitigate losses, resulting in increased selling pressure on Bitcoin and other assets.
• The dynamics of the yen carry trade may introduce additional risks for high-beta assets like Bitcoin.
• The correlation between U.S. monetary policy and Japanese interest rate decisions remains a critical factor influencing market stability.

Updated: 12/5/2025, 8:33:18 AM