Crypto investors are closely watching Japan this week, as the Bank of Japan prepares for a major policy decision that could impact Bitcoin, XRP and the broader digital asset market.
Japan is expected to raise interest rates again, a move that has historically triggered volatility across risk assets, including cryptocurrencies.
Japan plays an important role in global liquidity through the yen carry trade. For years, investors borrowed cheap money from Japan and invested it in higher-risk assets such as stocks, Bitcoin and altcoins.
When Japan raises interest rates, borrowing becomes more expensive. This often forces investors to unwind positions and move money out of riskier markets, putting pressure on crypto prices.
History shows a clear pattern. In March 2024, the Bank of Japan ended its negative interest rate policy for the first time in 17 years. Bitcoin held steady initially but dropped sharply in the following month, losing nearly $20,000 from its peak.
Similar moves were seen after rate hikes in July 2024 and January 2025. In each case, Bitcoin fell between 10% and 30% in the weeks after the policy decision before finding a bottom.
XRP is drawing attention as traders look for assets that could hold up better during periods of tightening liquidity. Supporters point to XRP’s role in cross-border payments and its relatively stable supply structure as potential strengths during macro-driven sell-offs.
While XRP is not immune to broader market pressure, some analysts say it could recover faster if liquidity conditions improve.
Market indicators say the setup is not as overheated as in previous cycles. Bitcoin is not showing extreme overbought signals, which may limit the size of any sell-off following Japan’s decision.
Past rate hikes were followed by recoveries within 30 to 60 days, even after sharp declines.
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