XRP Today's News: Yen Arbitrage Liquidation Panic Strikes, $1.82 Support at Risk

December 16, XRP dropped to $1.8657, a decline exceeding the broader market. The 10-year Japanese government bond yield approached the 18-year high of 1.981%. The Bank of Japan is expected to raise interest rates by 25 basis points this week, and concerns over unwinding yen carry trades are putting pressure on the market. On the technical side, XRP broke below $1.90 and the 50-day and 200-day EMAs, confirming a short-term bearish trend, with the next support at $1.8239.

Japanese Bond Yields Near 2% Threatening

(Source: Trading View)

The rise of the 10-year Japanese government bond yield approaching 2% directly pressured XRP, reflecting its inverse relationship with Japan’s bond market. XRP is negatively correlated with the 10-year Japanese bond yield, a connection stemming from the yen carry trade mechanism. When Japanese interest rates rise, the profitability of yen carry trades (borrowing low-interest yen to invest in higher-yield assets like the US) diminishes, prompting traders to unwind risk assets and repay yen loans.

Last week, Bank of Japan Governor Ueda Fumio hinted at an imminent rate hike, citing wage growth and easing US tariff risks. Economists expect the BOJ to raise rates by 25 basis points to 0.75% on Friday, December 19. This rate hike follows the Fed’s 25 basis point cut last week, narrowing the US-Japan interest rate differential. A shrinking spread reduces the appeal of yen carry trades, leading investors to withdraw from risk assets such as US stocks, bonds, and cryptocurrencies, and repatriate funds to Japan.

An even more critical uncertainty is the outlook for Japan’s neutral interest rate. The neutral rate is the rate at which monetary policy is neither accommodative nor restrictive, and the BOJ may announce its neutral rate target at Friday’s press conference. A neutral rate of 1% to 1.25% could ease concerns about unwinding yen carry trades, indicating limited room for future rate hikes. Conversely, a neutral rate of 1.5% to 2% could trigger a wave of unwinding, with potentially disastrous effects on market sentiment.

History offers painful lessons. On July 31, 2024, the BOJ reduced Japanese government bond purchases and raised interest rates, triggering a sell-off in risk assets. XRP’s price plummeted from $0.6591 on July 31, 2024, to $0.4320 on August 5, a decline of 34.5%. Though XRP quickly rebounded afterward, this crash demonstrated the significant influence of BOJ policy on crypto markets. If the BOJ again signals a hawkish stance on Friday, a similar sell-off could occur.

Three Scenarios for BOJ Decision

Dovish Scenario: Neutral rate 1% to 1.25%, limited room for hikes, XRP tests $1.8239 then rebounds

Neutral Scenario: Neutral rate 1.5%, gradual rate hikes, XRP fluctuates between $1.75 and $1.90

Hawkish Scenario: Neutral rate 2%, multiple rate hikes expected, XRP breaks below $1.75 and tests $1.60

Market Structure Bill Delay Dashes Regulatory Hopes

The delay of the US Market Structure Bill adds another bearish factor to XRP news today. The bipartisan meeting on the bill failed to reach consensus, stalling US cryptocurrency legislation progress. Senate Banking Committee spokesperson said: “Chairman Scott and the Senate Banking Committee, along with Democratic colleagues, have made significant progress on the bipartisan digital asset market structure legislation, but negotiations continue, and they expect to hold a hearing in early 2026.”

This statement effectively signals the end of hopes to pass crypto legislation before year’s end. This week is the last legislative week of the year, and senators are expected to start their holidays as early as Wednesday. The Senate Agriculture Committee also failed to schedule a hearing due to time constraints. Previously, analysts anticipated the bill would be debated this week, paving the way for a Senate vote in early 2026; now, this timeline has been delayed by at least three months.

The impact of this delay is significant. Without legislation, investors seeking to avoid regulation remain unprotected, and institutional uncertainty persists. Given the prolonged legal battle with the SEC, XRP remains highly sensitive to legislative developments. On July 17, following the US House of Representatives’ submission of the bill for Senate review, XRP’s price surged 14.69% in a single day. The current delay similarly exacerbates negative sentiment, increasing Monday’s selling pressure.

Technical Breakdown: $1.82 Is the Final Support

(Source: Trading View)

On the technical side, XRP broke below the 50-day and 200-day EMAs on Monday, indicating a bearish trend. The key support is at $1.8239, the low from November 21, and the last line of defense for the short-term bearish outlook. Falling below $1.8239 would confirm a reversal to a short-term downtrend, with the next support at $1.75. Deeper support is around $1.60; reaching this level would imply an additional approximately 16% decline from current prices.

Conversely, if XRP breaks above the resistance at $1.9112, bulls may attempt to challenge the $2.00 psychological level. Continued突破 of $2.00 would face resistance at the 50-day moving average of $2.1974 and the $2.20 level. Sustained突破 of the 50-day moving average would suggest a trend reversal to bullish, with medium-term (4-8 weeks) targets at the 200-day moving average of $2.4413 and the $2.50 level.

In the short term, bearish pressure dominates. The BOJ’s Friday decision and forward guidance, US employment and CPI data on Tuesday and Thursday, and XRP spot ETF capital flows will determine whether XRP can hold the $1.8239 support or will accelerate downward after breaking it. Weak US labor markets and slowing inflation may boost expectations of a Fed rate cut in March, easing some pressure. However, the hawkish stance of the BOJ and the negative impact of legislative delay are unlikely to be fully absorbed in the near term.