Why Bitcoin crashed 5%: Fears of Japan rate hike sparked selloff

The price of Bitcoin fell sharply on Monday, December 1, dropping more than 5% to briefly trade below $86,000 and leading a broad downturn across cryptocurrency markets.

The slide reversed gains from last week’s recovery and pushed the total crypto market cap back below $3 trillion.

Key details of the decline include:

• Bitcoin fell to as low as $86,000 before a partial recovery to $86,756.
• Ether dropped 5.56% to $2,840, while other major altcoins including Solana, XRP, and BNB fell between 5-7%.
• The sell-off triggered massive liquidations, wiping out nearly $646 million in leveraged positions within 24 hours with about 90% of these being bullish bets.

What’s driving the selloff?

Various factors are contributing to the recent downturn:

• Rising Japanese bond yields and strengthened expectations of a Bank of Japan rate hike strengthened the yen, causing unwinding of popular “carry trades” that had funded risk assets such as crypto.
• Reports of a $9 million hack of crypto platform Yearn Finance added to negative sentiment.
• A weekend statement from the People’s Bank of China reiterating warnings about illegal digital currency activity weighed on Asian market sentiment.
• Uncertainty over U.S. interest rates and stretched valuations in tech and AI sectors have made investors cautious as December begins.

Market impact and outlook

The recent drop marks a continuation of the volatility that defined November, which is labelled as Bitcoin’s worst month since the 2021 crash.

Traders now watch key support levels, with some analysts indicating Bitcoin could test $80,000 before stabilizing.

As the market enters the final month of 2025, investors are closely watching central back signals, specially from the BOJ and the Federal Reserve, for clues on whether the crypto rally can regain its momentum or if further declines are ahead.