Bitcoin's price has fallen sharply to around $85,000, marking a 7% drop on Monday, as analysts link the decline to the unwinding of the Yen carry trade driven by rising Japanese government bond yields.
Expert Shanaka Anslem highlighted that the yield on Japan's 10-year bonds reached 1.877% on December 1, 2025—the highest since June 2008—with the 2-year yield hitting 1%, a level not seen since before the Lehman Brothers collapse. This surge has triggered a massive unwinding of the Yen carry trade, estimated between $3.4 trillion and $20 trillion, where investors borrowed cheap yen to invest in assets like Bitcoin.
The mechanics are straightforward: as yields rise, the yen strengthens, making leveraged positions unprofitable and leading to liquidations. On October 10, $19 billion in crypto positions were liquidated, the largest single-day wipeout in history. By November, Bitcoin ETFs saw $3.45 billion in outflows, with BlackRock's IBIT losing $2.34 billion. On December 1 alone, $646 million was liquidated before lunchtime.
Bitcoin's correlation with major stock indices has increased, showing 46% with the Nasdaq and 42% with the S&P 500, transforming it from an uncorrelated hedge to a leveraged indicator of global liquidity.
Despite the drop, whale investors accumulated 375,000 BTC during this period, and miners reduced their monthly sales from 23,000 BTC to just 3,672 BTC.
Looking ahead, the Bank of Japan's policy decision on December 18 is crucial. Nic Puckrin from The Coin Bureau noted that the likelihood of a rate hike is now at 76%. If the bank raises rates, Anslem warns that Bitcoin could test the $75,000 level, an additional 11% drop.
On-chain data places critical support at $88,000 via the CVDD Channel. If this level fails, next supports are at $76,800 and $71,250. Retail interest is fading, indicating late-cycle capitulation.
