Massive Miner Exodus, Capital Withdrawals, Japan's Rate Hike—Why Is Bitcoin in Trouble?

This week’s start has not been smooth. Bitcoin dropped to around $85,600, and Ethereum lost the $3,000 level; meanwhile, stocks of crypto-related companies were also bloodied—Strategy and Circle experienced nearly 7% decline in a single day, Coinbase fell over 5%, and miners like CLSK, HUT, WULF, and others even declined by more than 10%. From the Fed’s rate hike expectations, the uncertainty of subsequent U.S. monetary policy, to systemic risk avoidance by long-term holders, miners, and market makers, all these declines are driven by macroeconomic factors.

On-Chain Signals Are the Least Deceptive: Large Amounts of Bitcoin Are Pouring Into Exchanges

The most direct sell pressure signals come from on-chain data. On December 15 (UTC+8), net inflow of Bitcoin into exchanges reached 3,764 BTC (about $340 million), hitting a local high. Among them, Binance’s net inflow was 2,285 BTC in a single day, eight times the usual level—clearly indicating large holders preparing to sell.

The on-chain analysis platform CheckOnChain has detected a large-scale rotation of Bitcoin hash power configuration, a phenomenon usually seen during periods of miner stress and market liquidity contraction. Even more concerning is that, according to Glassnode data, OG holders who haven’t moved their chips in over six months have been continuously offloading for several months, especially from late November to mid-February.

Meanwhile, Bitcoin’s total network hash rate has sharply declined. F2Pool data shows that as of December 15, the hash rate was 988.49 EH/s, down 17.25% from a week earlier. There are even rumors that Bitcoin mining farms in Xinjiang are gradually shutting down; based on an average of 250T per machine, at least 400,000 miners have been shut down recently.

Spot ETF Also Selling, “Smart Money” Is Doing the Opposite

The ETF market performance is also not optimistic. On that day, Bitcoin spot ETFs experienced net outflows of about $350 million (around 4,000 BTC), mainly from Fidelity FBTC and Grayscale GBTC/ETHE. Ethereum ETFs also followed, with net outflows of about $65 million (around 21,000 ETH).

Interestingly, according to Bespoke Investment, since BlackRock’s IBIT Bitcoin ETF launched, holding positions outside U.S. trading hours has yielded a 222% return, but holding during trading hours resulted in a 40.5% loss. This indicates that traditional market “smart money” is engaging in arbitrage—selling during the day and buying back at night, revealing how fragile market sentiment can be.

The behavior of market makers is also worth noting. For example, Wintermute transferred over $1.5 billion in assets to exchanges from late November to early December. Although their BTC positions increased by 271 BTC from December 10-16, such large-scale capital flows alone are enough to trigger market concerns.

The Real Culprit Behind This Drop Is the Bank of Japan

Why can the monetary policy moves of a single East Asian country trigger shocks in the global crypto market? The answer lies in the power of yen arbitrage.

Historical data shows that whenever the Bank of Japan raises interest rates, Bitcoin holders tend to suffer. After the last three rate hikes by the BOJ, Bitcoin fell by 20-30% within 4 to 6 weeks. Specifically, after the March 2024 rate hike, BTC dropped 27%; after the July rate hike, it fell 30%; and after the January 2025 hike, it also declined 30%. Now, a new rate hike is underway—this is the first since January 2025, with a 97% market expectation of a 25 basis point increase, possibly pushing rates to a 30-year high.

The key issue is that Japan is the largest foreign holder of U.S. Treasuries, with over $1.1 trillion. When the BOJ changes its policy stance, it causes shocks across global dollar liquidity, bond yields, and risk assets like Bitcoin.

A deeper mechanism is the collapse of yen arbitrage. For years, global investors borrowed yen at low interest rates and invested in U.S. stocks, bonds, or crypto assets. When the BOJ begins to hike rates, these low-cost leveraged positions are forced to unwind, triggering a chain reaction of deleveraging.

Even more concerning is the policy signal from the BOJ for 2026. They have confirmed that starting January 2026, they will sell about $55 billion worth of ETFs. If they continue to hike rates or do so multiple times next year, we could face a vicious cycle: more rate hikes → accelerated bond selling → further collapse of yen arbitrage → significant correction of risk assets.

The only scenario that could reverse the trend is if the BOJ holds steady after this rate hike, then after an initial sharp decline, the market might have room for a rebound.

The Fed’s Ambiguity Is Causing the Market to Fear Itself

The Fed just cut rates last week, which should be a positive signal. But the market’s focus has instantly shifted to new questions: Will there be more rate cuts in 2026? Will the pace slow down?

Two key data releases are imminent this week. The first is employment data (non-farm payrolls), expected to increase by only 55,000, far below the previous 110,000. The second is the December 18 CPI data, which market participants are discussing whether it will prompt the Fed to “accelerate balance sheet reduction” to counteract the tightening policies of the BOJ.

The logic is quite paradoxical: weak employment data suggests the economy might be cooling from overheating, which should be good for rate cuts. But if the data is too weak, the Fed might worry about recession risks and adopt a wait-and-see approach, pausing further easing. The result is that the certainty of rate cuts diminishes.

According to Polymarket predictions, the probability of the Fed maintaining current rates on January 28 is as high as 78%, while the chance of a rate cut is only 22%—implying that within the next half-year, no further cuts are expected. This long-term uncertainty is deadly for risk assets.

Meanwhile, the Bank of England and the European Central Bank are also meeting this week. Global central bank policies are now highly divergent: Japan tightening, the U.S. hesitating, Europe waiting. This “inconsistent liquidity” environment often has a more damaging effect on Bitcoin than clear tightening.

Summary: Passive Selling Under Triple Pressure

This decline is not caused by a single factor but by the stacking of three forces:

First, the BOJ’s shift to tightening broke the global liquidity balance, and the unwinding of yen arbitrage triggered a worldwide deleveraging wave.

Second, the Fed’s ambiguous policy outlook for 2026 has significantly lowered market expectations for dollar liquidity.

Third, on-chain data shows that long-term holders, miners, and market makers are all actively offloading, indicating that even industry veterans are preparing for potentially greater risks.

When macro liquidity contracts, policy outlooks are uncertain, and participants collectively reduce their holdings, Bitcoin falling back to $85,600 is actually a relatively mild performance. The key now is to wait for U.S. employment and inflation data, as well as the official decisions from various central banks—these macro data points hold the real pricing power.