Bitcoin (BTC) experienced a sharp pullback in early Asian trading on Monday, dropping $85,500 on rising expectations for a December interest rate hike by the Bank of Japan (BoJ).
Important points:
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Bitcoin fell 5% to $85,000 in a market-wide correction, with $656 million of longs liquidated.
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Rising expectations for a rate hike at the Bank of Japan meeting on December 18-19 weighed on BTC prices.
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Bitcoin’s bear flag predicts a possible fall to $67,700.
Bitcoin wipes out liquidity, drops to $85,000
Amid the broader market pullback, BTC price fell to $85,616 on Monday, down 5.5% in the past 24 hours.
This widened the drawdown to 32% from its record high of $126,000 on October 6th, and triggered massive liquidations across the derivatives market.
Related: Speculation of Fed rate cut spikes: Can Bitcoin finally break through $91,000 and rise further?
Over $564.3 million in long positions were liquidated, of which Bitcoin accounted for $188.5 million. Ether (ETH) followed with $139.6 million in long-term liquidations.
Overall, short and long positions wiped out a total of $641 million from the market, as shown in the chart below.
Several analysts blamed the downturn on rising expectations that the Bank of Japan would raise interest rates at its December 18-19 meeting. The potential tightening, Japan’s first since January, amplifies concerns about an unwinding of large yen carry trades, weighing on risk assets such as cryptocurrencies.
BitMEX co-founder Arthur Hayes said in Monday’s XPost that “USD/BTC was sold off because the BOJ raised interest rates in December,” adding that a USD/JPY rate of $155-160 “makes the BOJ hawkish.”
Yields in Japan have soared, with two-year bonds at their highest level since 2008. The yen is also skyrocketing,” Co-founder and CEO Coin Bureau Nick said in the latest post about X.
As a result, “bond investors see a 76% chance that the Bank of Japan will raise interest rates on December 19th,” Nick wrote, adding:
“A rise in Japan’s base interest rate and a strong yen will lead to an unwinding of carry trades (borrowing in yen and buying risky assets).”
A Reuters poll found that 53% of economists expect interest rates to rise, up from last month, citing the risk of imported inflation and weakening political pressure to ease them. Polymarket bettors currently have a 52% chance of a 25bps rate hike at the December 19th meeting.
The appreciation of the yen due to rising interest rates has increased the cost of carry trades, prompting investors to exit their positions en masse. This has forced the sale of risky assets, as seen in August 2024, when the Bank of Japan’s sudden interest rate hike caused BTC prices to plummet by 20% to $49,000, resulting in $1.7 billion in liquidations.
How far will the price of Bitcoin fall?
Bitcoin liquidation heatmap shows the price has eaten into around $86,000 of liquidity, with millions of bid orders still stuck between the spot price and $79,600.
This suggests that Bitcoin price could fall further to wipe out this liquidity before showing a recovery.
From a technical perspective, the bear market was validated on Monday when the price fell below the lower limit of $90,300 on the daily chart.
A daily candlestick close below this level confirms the continuation of the downtrend towards the flag’s measured target of $67,700 (near the 2021 all-time high). Such a move would result in a total loss of 21%.
Veteran trader Peter Brandit shared a chart showing that Bitcoin’s macro downtrend could find support within the lower green zone between $45,000 and $70,000.
Not to bust anyone’s bananas, but the upper end of the lower green zone starts below $70, with lower support in the mid-$40s.
How long before a sailor asks about a lifeboat? $BTC pic.twitter.com/YLfjSDdw9H— Peter Brandt (@PeterLBrandt) December 1, 2025
As reported by Cointelegraph, Bitcoin is on a bear market trajectory in 2022 so far, with a near 100% correlation in 2025. If this trend continues, a real BTC price rebound may not occur until the first quarter of next year.
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.
