Bitcoin traders watch the Bank of Japan as yen shorts hit a nine-year high ahead of a possible rate hike

Bitcoin market participants are closely tracking the Bank of Japan's policy decision due Tuesday, CoinDesk reported, citing Huo Xing Finance. Speculative short positions in the yen held by leveraged funds climbed above 115,000 contracts in the week ended June 9, the largest build since November 2017. Markets are pricing in a move that could lift the policy rate to 1%. If the BOJ delivers that hike and signals additional tightening, short sellers may rush to cover, potentially driving a sharp yen rebound and unwinding yen-funded carry trades. Carry traders typically borrow in yen to buy higher-yielding risk assets, a strategy widely seen as having supported bull runs in U.S. equities and bonds over recent years and, by extension, demand across crypto. A similar dynamic played out after the BOJ's July 2024 rate increase, when rapid short-covering triggered a strong yen rally and sparked volatility across Wall Street, the Nikkei Index and digital assets. Bitcoin slid from roughly $65,000 to $50,000 within a week. If Governor Kazuo Ueda points to an even faster tightening path or leaves the door open to rates rising above 1% after this step, the yen could strengthen further, raising the risk of broad market turbulence. Crypto markets, which tend to react most sharply to abrupt liquidity shifts, could see the biggest fallout.