What kind of chain reaction will occur in the cryptocurrency market if Japan raises interest rates?

The ultra-low interest rate policy maintained by the Bank of Japan for a long time is an important source of global "cheap money". Once this policy shifts, its impact will far exceed Japan itself and become a sword for the global capital market.

Impact on the US stock market: This will directly lead to funds flowing out of the US stock market, especially for interest rate-sensitive technology growth stocks, whose discount rates in valuation models will rise significantly, facing a double blow from capital outflow.

Impact on the cryptocurrency market: The cryptocurrency market is a heavy disaster zone for high leverage. Once cheap leverage is withdrawn, the market will face de-leveraging pressure, liquidity will tighten rapidly, potentially leading to severe price fluctuations or even crashes.

An interest rate hike in Japan usually drives the yen to appreciate, creating a "seesaw" effect with the dollar. In the short term, the dollar may weaken relative to the yen, potentially driving up the prices of cryptocurrencies priced in dollars. However, this is more like "good news turning into bad news"; if the market shifts to a risk-off mode because of this, then a weaker dollar may actually become a reason for selling.

In the face of macro liquidity, cryptocurrencies are not a "decentralized safe haven"; like US stocks, they are also (high-risk) assets.

When the Bank of Japan signals an interest rate hike, rather than closely monitoring the yen exchange rate, it is better to closely observe the scale of JPY arbitrage trade unwinding and changes in US Treasury yields, as these are more reliable indicators of market direction.