The crypto market hangs between hope and fear. The past two weeks have brought renewed optimism, as the TOTAL crypto market cap has formed two higher lows, marking the first resistance break in more than a month.
Notably, this jump represents a return of approximately $350 billion to the market. That’s solid liquidity, especially now that the Fed has completed QT. That’s why analysts now think this could be an early indication of the next easing cycle.
However, has the sentiment really shifted from hope to greed? Without this, a bull run is still unlikely.
But as volatility increases around a key market area, analysts are beginning to warn against the slide into ‘blind’ optimism.
Japan’s actions are causing ripples in global markets
Japan plays a central role in the global economy for several reasons.
For starters, Japan is the fourth largest economy in the world, with a nominal GDP of $4.28 trillion in 2025. Japan also owns about 12 to 15% of the economy. US government bondsmaking it the largest foreign holder.
Essentially, the economic size and influence of the Treasury ensure that the Bank of Japan’s (BOJ) moves flow through global markets. Against this background the latest $135 billion stimulus of the BOJ, which sparked market rumors, was no fluke.
Source: TradingView
For context, the Japanese government subsequently rolled out a $135 billion stimulus October inflation came in below expectations by 3%. The short-term market reaction was bullish, fueled by expectations of a liquidity boost.
But looking ahead, markets are pricing in an 80% chance of a rate hike on December 18 and 19. BOJ meetingwhile Japanese 30-year government bond yields of 3.43% are increasing pressure on long-term borrowing costs.
In short, Japan is under increasing financial pressure. With high levels of debt, higher interest rates and rising interest rates, the cost of holding cash in Japan is rising. Japan, as the largest holder of US government bonds, could be that forced to sell?
The financial stress in Japan is now a problem for the US market
Volatility in Japan is spilling over into the US markets.
In terms of context, Japan has the highest ratios between public debt and GDP in the world. The national debt is over 200% of GDP. Consequently, this limits Japan’s ability to raise cash through loans, prompting the BOJ to look for alternative options.
One option is to adjust the rates. Recent stimulus measures have increased pressure, largely pricing in a rate hike at the upcoming BOJ meeting. The impact on US markets? Expensive leverage could force liquidations.
Source:
As previously noted, Japan is the largest holder of US government bonds, with more than 12% of all foreign assets. If Japanese yields rise, the risk of a broad sell-off in government bonds increases, which is exactly what the analyst highlights in the chart above.
Simply put, money that once flowed from Japan into U.S. stocks or cryptocurrencies could go the other way. Investors who borrowed cheaply in Japan may have to unwind their positions as leverage becomes more expensive.
In short, the macro volatility for crypto is far from resolved.
The Fed’s A pause on QT has increased near-term risk appetiteBut as Japan’s financial pressure spills over into US markets, the real question is: can this environment really support risky investing over the long term?
Crypto bounce continues to face macro headwinds
The crypto market is still stuck in indecision.
Still, expectations of QE have created new liquidity over the past two weeks. To complement that momentum, chances of interest rate cuts for the upcoming FOMC meeting have risen to a monthly high of 89%.
All this has contributed to a clear bullish bias in the short term. Take Bitcoin [BTC]for example. An 8% gain over the past two days has reversed a two-week pullback, pushing the price back above the $93,000 mark.
Source: TradingView (BTC/USDT)
In short, the latest crypto bounce still relies heavily on macro flows.
And with US markets absorbing pressure from Japan, crypto is in a vulnerable position. In circumstances like these, another one Flash crash cannot be ruled outespecially given the BOJ’s growing influence in US markets.
Against this backdrop, the upcoming BOJ meeting on December 18 and 19 could set the tone for the crypto market. How investors react to a potential rate hike will likely decide whether BTC can break past $100,000.
Final thoughts
- Financial tensions in Japan are trickling down to US markets, creating uncertainty for risky assets.
- Short-term cryptocurrency gains are driven by macro liquidity, but Japan-related volatility leaves the market vulnerable to another flash crash.