Monday morning and the first trading day of December felt a bit like waking up with a hangover after November’s wild party.
Bitcoin, which had been flirting with new all-time highs just days ago, decided to take the elevator straight down, dropping more than 6% in Asian hours and dragging everything risky with it. By the time Europe opened, S&P futures were already down 0.7%, Nasdaq futures almost 1%, and anyone long crypto-linked stocks was staring at a sea of red.
So what on earth happened?
The Spark Came From Tokyo – Again
Bank of Japan Governor Kazuo Ueda gave a speech to business leaders and, in his usual extremely polite Japanese way, basically said: “We are seriously looking at the pros and cons of hiking rates at the December meeting.”
Markets heard: “We are hiking in December, deal with it.”
Within minutes the two-year JGB yield punched above 1% for the first time since 2008, the yen ripped higher, and the great unwind of the yen carry trade that had fueled so much of 2025’s risk-on euphoria suddenly looked very real again.
“If the outlook for economic activity and prices materialises, we will continue raising rates… delaying too long could force sharper adjustments later.”
– BOJ Governor Kazuo Ueda, December 1 speech
Traders who have been short the yen for years (and using the proceeds to buy literally everything else) suddenly remembered that central banks can still surprise. The result? A classic Monday morning risk-off move.
How Bad Was the Crypto Damage?
Pretty ugly if we’re honest.
- Bitcoin fell from roughly $91,800 to a low of $85,200 in a matter of hours
- Ethereum dropped 8% in sympathy
- Coinbase (COIN) pre-market –4%
- MicroStrategy, the corporate bitcoin whale, down 5% pre-market
- Even mining stocks that had been on fire got smoked
I’ve been around crypto long enough to know that these overnight Asia-session liquidations can be brutal, but the speed of this move felt different. It wasn’t just leverage getting rinsed – it was the narrative shifting.
When the yen starts strengthening because the BOJ might actually tighten policy for the first time in decades, the entire “reflation trade” that powered bitcoin to $100k+ in people’s dreams starts to wobble.
Stocks Didn’t Escape Either
By 8 a.m. ET the damage was clear:
- S&P 500 futures –0.7%
- Nasdaq 100 futures –1.0%
- Russell 2000 futures –0.8% (small caps had been the darling last week)
- Magnificent 7 all red: Nvidia –1.9%, Tesla –1.2%, Meta –1.4%
The VIX climbed back toward 18, a level that suddenly doesn’t feel so complacent anymore.
European stocks opened weak too, with the Stoxx 600 down 0.4% and Airbus dragging after news of yet another software glitch on the A320 fleet. Only the mining sector held up, riding the copper surge to fresh all-time highs.
Bond Yields Are the Real Tell
While everyone fixates on bitcoin’s face-plant, the bond market is quietly telling the more important story.
Ten-year Treasury yields jumped 3-4 bps to 4.04%, ten-year JGB yields rose 6-7 bps, and German bund yields followed higher. When the world’s biggest provider of loose money (Japan) starts talking about removing accommodation, global liquidity conditions tighten whether the Fed cuts or not.
I’ve said it before and I’ll say it again: the BOJ is the most under-rated central bank in the world when it comes to global market impact. One polite sentence from Ueda and half the carry trades built over three years start looking shaky.
Is This Just a Healthy Pullback or Something Bigger?
That’s the trillion-dollar question (literally).
November was the seventh straight up month for the S&P 500 – the longest streak since 2021 – and valuations had started to look stretched again, especially in anything AI-related. Bitcoin had run from $70k to almost 100k in six weeks. A breather was probably overdue.
But the speed of the move and the catalyst (BOJ tightening) feels different from the usual “take profit into year-end” narrative.
Add in the fact that President Trump said yesterday he has already chosen the next Fed Chair (rumored to be Kevin Hassett, a known dove), and you have a fascinating push-pull:
- BOJ potentially tightening → less global liquidity
- Fed almost certainly cutting 25 bps in two weeks → more U.S. liquidity
Two of the biggest liquidity spigots moving in opposite directions at the same time. No wonder markets are confused.
What I’m Watching This Week
Beyond the obvious ISM manufacturing print today and the data calendar is actually pretty light until Friday’s delayed September PCE, but here are the levels that matter to me right now:
- Bitcoin $83,000 – if we lose that, the next real support isn’t until the mid-70s
- S&P 500 5,850 – the 50-day moving average and site of last month’s low
- USD/JPY 155 – already breached, next stop 152 if the BOJ story runs
- 10-year Treasury 4.10% – a break here opens the door to 4.35% quickly
- Copper – still making new highs. Commodities refusing to join the risk-off move is interesting
Perhaps the most intriguing part? Small caps, the Russell 2000 actually held up relatively well in the early carnage. If lower U.S. rates and a weaker dollar eventually win the tug-of-war, domestic plays could still have legs even if global liquidity tightens.
Final Thoughts – Don’t Panic, But Respect the Move
I’ve been doing this long enough to know that the first sharp move in December often sets the tone for the entire month. 2018’s Christmas Eve meltdown started exactly like this – an Asian session gap lower that never really recovered.
But we’re not there yet. The Fed is still dovish, earnings growth is still solid, and the U.S. consumer hasn’t rolled over. This feels more like a liquidity scare than the start of a bear market.
That said, anyone who was 100% convinced bitcoin was going straight to 150k and the S&P to 7,000 by March just got a very loud wake-up call. Global liquidity conditions can change faster than most people think, and the Bank of Japan just reminded everyone it still exists.
Fasten your seatbelts. December just got interesting.
Trade safe,
(Note: Full 3,000+ word version with charts, sector breakdowns, and positioning data available to premium subscribers – but the core message is above. The market just shifted under our feet, and pretending otherwise is dangerous.)
