Rising Japan Yields Trigger Bitcoin Sell-Off: Asian Trading Hours See $290M Long Liquidations
Introduction
On December 1, 2025, Bitcoin’s price slid below $87,500 during Hong Kong's morning trading hours, triggering a wave of forced selling across cryptocurrency markets. This sharp downturn was directly precipitated by a surge in Japanese government bond yields to their highest level in 17 years, strengthening the yen and tightening short-term liquidity conditions that are critical for leveraged crypto positions in Asia. The sell-off, which also saw Ether fall toward $2,850, resulted in the liquidation of more than $150 million in Bitcoin long positions and approximately $140 million in Ether long positions. This event underscores the deepening sensitivity of digital asset markets to macroeconomic shifts and central bank policy signals emanating from key global financial hubs like Tokyo.
The Catalyst: Japanese Bond Yields Hit 17-Year Highs
The immediate trigger for the market volatility was a significant selloff in Japanese government bonds. Japan’s 2-year government bond yield briefly touched 1.01 percent, a level not seen since 2008. This move represents a profound shift in the interest rate landscape of the world's third-largest economy. For over a decade, the Bank of Japan (BOJ) has maintained a policy of near-zero interest rates, creating an environment of cheap yen that has fueled investment in higher-yielding assets worldwide. The yield surge followed comments by BOJ Governor Kazuo Ueda, who stated that the board would evaluate whether a rate hike is appropriate at its policy meeting later in December. This signaled to traders that the central bank's long era of ultra-loose monetary policy could be coming to an end, prompting a rapid repricing of risk across asset classes.
The Yen Carry Trade Unwind and Its Impact on Crypto Liquidity
A critical mechanism linking Japanese monetary policy to cryptocurrency prices is the yen carry trade. In a carry trade, investors borrow money in a currency with low interest rates, like the yen, and invest it in assets with potentially higher returns, such as cryptocurrencies. This practice has been a significant source of liquidity for risk assets throughout 2025. As traders pushed up the yen value during the morning session in Tokyo on December 1, it initiated an unwind of these yen-funded positions. When the yen strengthens, it becomes more expensive to repay those borrowed funds, forcing investors to sell their risk assets—including Bitcoin and Ether—to cover their positions. Crypto markets, which are deeply sensitive to these short-term liquidity conditions in Asia, bore the brunt of this forced deleveraging.
Market Fallout: BTC and ETH Lead Crypto Sell-Off
The direct consequence of the liquidity squeeze was a sharp decline in major cryptocurrency prices. Data from the morning of December 1 showed Bitcoin breaking below key support levels, ultimately sliding below $87,500. This price movement set off a cascade of automatic liquidations on leveraged trading platforms, with more than $150 million in BTC long positions being forcibly closed. Similarly, Ether fell toward $2,850, accompanied by the liquidation of about $140 million in long positions. The simultaneous pressure on both leading cryptocurrencies highlights a market-wide risk-off sentiment during the Asian trading window, where leveraged positions are particularly vulnerable to sudden shifts in macroeconomic expectations.
Traders Bet on BOJ Policy Shift Amid Heightened Uncertainty
The market reaction reflects a significant reassessment of Japan's monetary policy trajectory. Prediction markets have become a key gauge for this sentiment. On Polymarket, traders now price the chances of a BOJ rate increase in December at roughly 50%, a jump of seven percentage points following Governor Ueda's comments. This uncertainty creates a volatile environment for traders. The focus for the week will remain squarely on the yen's movement and any further communication from the BOJ. Any additional signals pointing toward policy tightening could trigger another round of volatility not just in traditional regional markets but also across the digital asset space.
Broader Market Context: Asia-Pacific Assets Under Pressure
The crypto sell-off occurred within a broader trend of risk aversion across Asia-Pacific financial markets. On the same day, Japan’s Nikkei 225 index was down 1.3%. This parallel decline demonstrates that the impact of rising Japanese yields was not isolated to cryptocurrencies but was part of a regional shift away from risk assets. Traders were also awaiting China’s manufacturing data and pricing in an 87% chance of a Federal Reserve rate cut, illustrating the complex interplay of global macroeconomic factors influencing market sentiment at the start of December.
Conclusion: A New Era of Macro-Driven Crypto Volatility
The events of December 1, 2025, serve as a stark reminder that cryptocurrency markets have matured into assets deeply intertwined with global macroeconomics. The sell-off triggered by rising Japanese yields demonstrates that liquidity conditions and central bank policies in major economies are now primary drivers of short-term price action in digital assets. For professional traders and investors, this underscores the necessity of monitoring traditional finance indicators like bond yields and central bank communications with the same rigor applied to on-chain metrics and network data. Moving forward, market participants should watch for the BOJ's decision later in December and any sustained strength in the yen, as these will be critical indicators for liquidity conditions affecting leveraged crypto positions. The era where crypto operated in a vacuum is over; its future volatility will increasingly be a function of global capital flows and monetary policy shifts.