The cryptocurrency market took another hit on January 20, extending its recent weakness as global investors pulled back from risky assets. Bitcoin and most major altcoins traded in the red, dragging the total market value of all digital tokens down by around 2% in the past 24 hours to roughly $3.08 trillion.
So what’s behind today’s crypto sell-off? A mix of rising Japanese bond yields, fresh geopolitical tensions sparked by Donald Trump, and weakening activity in crypto futures markets are combining to weigh on prices.
Here’s a closer look at the three main drivers.
1. Japan’s Rising Yields Shake Risk Assets
One of the less obvious but most powerful forces hitting crypto today comes from Japan.
Japanese government bond yields surged to multi-year highs as signs grew stronger that the Bank of Japan (BoJ) plans to stick with a hawkish stance this year. Economists now expect the central bank to keep raising interest rates in a bid to stabilize the yen, which has been under pressure for months.
Citigroup analysts recently predicted that the BoJ could deliver three rate hikes this year, pushing Japan’s headline interest rate to 1.50%, a level not seen in decades.
This matters for crypto because higher Japanese rates threaten to unwind the long-running carry trade, where investors borrowed cheaply in Japan and invested in higher-yielding or riskier assets abroad — including Bitcoin and other cryptocurrencies. As that trade reverses, money tends to flow out of assets like crypto, adding selling pressure.
Expectations for more rate hikes gained further traction after Japan’s currency weakened and Prime Minister Sanae Takaichi promised additional tax cuts if she wins February’s election.
2. Trump’s Tariff Threats Rattle Markets
Geopolitics is also playing a big role in today’s downturn.
Former U.S. President Donald Trump announced plans to impose new tariffs on key allies, including the UK, Norway, Sweden, and Denmark, stoking fears of a renewed transatlantic trade war.
Tensions escalated after Trump posted a series of comments claiming U.S. control over Greenland, just days before heading to the World Economic Forum in Davos. His remarks, which included sharp comments aimed at European leaders such as France’s Emmanuel Macron, alarmed both markets and NATO allies.
Trump later doubled down, saying he intended to “get” Greenland for the U.S., even suggesting the use of force — a claim firmly rejected by Denmark and Greenland’s government as illegal under international law.
In response, European Union leaders have discussed imposing retaliatory tariffs on up to $108 billion in U.S. imports, with Brussels also threatening reciprocal duties worth more than €93 billion.
This rising uncertainty has pushed investors away from volatile assets like crypto and into safer havens.
Adding another layer of uncertainty, the U.S. Supreme Court is expected to rule this week on the legality of Trump’s tariffs. While traders on Polymarket largely believe the court will strike them down, reports suggest the decision may still fail to offer clear direction.
3. Cooling Interest in Crypto Futures
The third factor dragging down the market is a slowdown in the crypto derivatives space.
According to CoinGlass, futures open interest has fallen to $136 billion, down from this month’s high of $146 billion. This decline signals weaker demand from traders betting on future price moves.
Falling open interest is often seen as a bearish sign because it suggests investors are closing positions and reducing exposure. Historically, such periods tend to coincide with lower prices and rising liquidations across exchanges.
Where Prices Stand Now
Against this backdrop, Bitcoin slid to around $90,000, well below its year-to-date high of $98,000.
Ethereum dropped roughly 4% to $3,000, while major altcoins such as Solana, Dogecoin, and Monero lost more than 3%.
With macro pressures building and investor sentiment weakening, crypto markets may remain under pressure until clearer signals emerge from central banks and global politics. For now, traders appear to be bracing for more volatility ahead.
Also Read: Bitcoin Faces Fresh Pressure as Peter Brandt Warns of Bearish Channel
