Japan's expected rate hike may curb liquidity for BTC and other risk assets

An expected interest rate hike in Japan could shrink liquidity in risk asset markets, including Bitcoin, amid concerns over the unwinding of the yen carry trade, according to an analysis by CoinDesk. The Bank of Japan (BOJ) is anticipated to raise its benchmark rate by 25 basis points at its December policy meeting, which would be the highest level since 1995. CoinDesk noted that this could diminish the appeal of the yen carry trade, a strategy of borrowing in Japan's ultra-low interest rate environment to invest in higher-yielding assets. A stronger yen typically coincides with risk-off sentiment, potentially tightening the liquidity conditions that recently fueled Bitcoin's recovery. The analysis added that while markets are already anticipating the move, a Japanese rate hike at a time of rising expectations for U.S. rate cuts could force investors to adjust their positions.