Bond Yields Surge and Crypto Pulls Back as Markets Await Fed and BoJ Decisions

The crypto market, which started December with renewed strength, is experiencing a pullback as global bond yields surge and investors position ahead of major central bank decisions. Bitcoin briefly pushed toward $94,000 earlier in the month, while Ethereum reclaimed the $3,200 level before losing momentum in the latest macro-driven correction.

Risk assets across the board are facing pressure as traders reassess interest-rate expectations for 2025–2026 and prepare for policy updates from both the U.S. Federal Reserve and the Bank of Japan.

Bitcoin Retraces After Early-Month Rally

According to a market update from Laser Digital, Bitcoin’s initial December rally was supported by strong institutional flows, including a nearly $1 billion BTC purchase by Strategy (formerly MicroStrategy). Positive sentiment was also fueled by anticipation surrounding Bitcoin’s upcoming Fusaka upgrade.

However, the rally has cooled following a sharp rise in global bond yields. Profit-taking has increased, and Bitcoin has pulled back from recent highs, with volatility picking up in short-dated derivatives. Traders are now positioning for potential post-announcement swings once central bank statements are released.

Bond Yields Climb to Multi-Year and Multi-Decade Levels

Macro conditions have turned more challenging as government bond yields rise sharply across major economies.

Japan’s 10-year government bond yield jumped to nearly 1.9%, the highest level in roughly three decades, as markets prepare for the possibility of a more assertive stance from the Bank of Japan. The move reflects growing expectations that the BoJ may need to tighten monetary policy after years of ultra-loose conditions.

In the United States, Treasury yields have also climbed as investors anticipate that the Federal Reserve will adopt a slower and more cautious rate-cut path in 2026. Although markets generally expect a 25-basis-point cut at the upcoming meeting, the long-term forward guidance from the Fed is seen as the key driver for markets in the weeks ahead.

Higher yields increase the opportunity cost of holding non-yielding assets such as gold and Bitcoin. They also tend to tighten financial conditions globally, which can accelerate risk-off sentiment across equities, crypto, and emerging markets.

Central Banks in the Spotlight

Federal Reserve

The Fed is widely expected to cut rates by 25 basis points, bringing the policy rate closer to the midpoint of the 3.5%–3.75% target band. While the rate cut itself is largely priced in, traders are focused on Chair Jerome Powell’s tone regarding the 2026 rate path. A more hawkish or data-dependent message could extend the current crypto pullback.

Bank of Japan

The BoJ faces its most scrutinized policy meeting in years. Inflation pressures and currency volatility are building, and markets are watching closely for any signs of rate normalization. Even mild adjustments in forward guidance—or a modest rate move—could trigger volatility in global FX and risk markets, potentially influencing crypto flows as well.

Implications for Crypto Traders

Crypto markets remain highly sensitive to macro conditions, and this week’s central bank decisions may set the tone for the rest of December.

Key variables traders are watching:

• Bitcoin’s reaction immediately after the Fed statement and press conference
• Movements in the U.S. 10-year Treasury yield
• Yen volatility following the BoJ announcement
• Broader risk sentiment across global equity and tech markets

A dovish or market-friendly message from either central bank could ease financial conditions and potentially revive the upward trend in crypto. Conversely, if yields remain elevated and policymakers emphasize caution, risk assets may continue to face selling pressure or prolonged consolidation.

Conclusion

December began with strong momentum for Bitcoin and the broader crypto market, but macroeconomic forces have once again taken center stage. Rising bond yields, shifting expectations for 2026 rate policy, and upcoming decisions from the Federal Reserve and the Bank of Japan have led traders to scale back risk exposure.

The coming days will determine whether this pullback is a temporary pause before renewed upside—or the beginning of a more defensive market environment across both traditional finance and digital assets.