Hawkish BoJ

The overnight plunge appeared to be triggered by Japanese government bond (JGB) futures tumbling on expectations that the Bank of Japan would raise borrowing costs at its December meeting.

Japan's 2-year government bond yield briefly touched 1.01 percent, the highest since 2008, as traders bet the Bank of Japan's long era of near-zero rates is ending. 

Some 90 minutes later, BOJ Governor Kazuo Ueda said in a speech that his board might increase interest rates soon.

Traders raised the odds of a BOJ rate hike in December to about 80% after Ueda told business leaders that the central bank "will consider the pros and cons of raising the policy interest rate and make decisions as appropriate."

Any hike would be an adjustment in the degree of easing, with the real interest rate still at a very low level, he said.

As Bloomberg reports, the reaction underscored how crypto investors must now reckon with macro forces far beyond the Fed which is widely expected to ease monetary policy at next week's meeting.

"In the early days, Bitcoin mostly moved to whatever the Fed was signaling, rate cuts, hikes, or balance sheet shifts," said Rachael Lucas, an analyst at BTC Markets.

"These days, Bitcoin reacts to the whole central-bank landscape, not just one player."

The reaction was swift and violent as the the threat to the 'yen carry trade' tanked risk assets broadly, but most of all bitcoin as the largest cryptocurrency plunged from around $92,000 to $84,000 before a small rebound back above $86,000.

"It's a risk off start to December," said Sean McNulty, APAC derivatives trading lead at FalconX.

"The biggest concern is the meagre inflows into Bitcoin exchange traded funds and absence of dip buyers. We expect the structural headwinds to continue this month. We are watching $80,000 on Bitcoin as the next key support level."  

Over 180,000 traders were liquidated in the past 24 hours, with total liquidations at $539 million and the majority of that in the past few hours, reported CoinGlass. Almost 90% of those liquidations were long positions, predominantly in BTC and Ether