Amid growing expectations that the Bank of Japan will raise interest rates this week, Bitcoin fell below $85,000 overnight, triggering the liquidation of nearly $600 million in long positions across crypto markets within 24 hours.
At the time of writing, Bitcoin has recovered slightly to around $86,000. The decline wiped out $218.7 million in long Bitcoin positions and $213 million in long Ethereum positions, with more than $200 million in liquidations concentrated within about an hour as the price fell towards $86,700, according to Coinglass data.
Market reports say the selloff is fueled by fresh concerns that the Bank of Japan will tighten monetary policy at this week's meeting, threatening the yen carry trade that funds risk assets.
When the Bank of Japan raises interest rates, investors who borrowed yen at low interest rates to buy high-yield assets will have to exit their positions. The Bank of Japan's monetary tightening measures to date have coincided with a sharp decline in Bitcoin.
Bitcoin remained above $90,000 through much of December, but once the price broke above that level, spot selling accelerated, triggering a cascade of liquidations of derivatives through a thin order book.
Macro headwinds and combined decline
Bitcoin fell throughout December as risk appetite weakened in the wake of the Federal Reserve's December 10 interest rate cut, which signaled only limited easing in 2025.
Bitcoin's weakness has been tied to a “news seller” reaction as traders avoided risk after the Federal Reserve maintained its hawkish outlook.
Tech and AI stocks fell after disappointing earnings, dampening the high-beta trade that had boosted cryptocurrencies along with speculative stocks.
Spot Bitcoin ETF inflows also declined last week, with net inflows of $286.6 million. Although weekly net inflows have remained consistent, capital inflows have not kept up with the consistent demand that supported prices through much of 2025.
The decline spread across major altcoins. Ethereum fell 4.6% in 24 hours to trade at $2,921.81. Solana fell 3.3% to $125.05, XRP fell 4.9% to $1.8822, BNB fell 3.5% to $846.29, Cardano fell 4% to $0.3807, and Dogecoin fell 4.6% to $0.1278.
When Bitcoin fell below $90,000, leveraged positions built during the previous rally became vulnerable.
Long positions were stopped in waves as the price passed through support levels, with each round of forced selling causing additional liquidations. The move was amplified by thin liquidity during trading hours in Asia.
The next few hours will be key to determining whether Bitcoin can reverse its leverage-driven selloff.
