If the Bank of Japan raises interest rates, will the market plummet?
Many people feel that it doesn't matter whether Japan raises interest rates or not, as the extent isn't significant. But the real danger has never been about 'how much' but rather - Japan has finally begun to take action.
For the past twenty years, Japan has been the source of the lowest-cost funds globally. A large amount of money is borrowed in yen to invest in U.S. stocks, cryptocurrencies, and various high-risk assets.
In short: Many market movements rely on Japan's low interest rates. Once interest rates rise, who is the first to face issues? Not the Japanese economy, but leveraged funds. As soon as there is an expectation of yen appreciation, carry trade funds have to close positions by selling stocks, selling currencies, and reducing risks. This is not a collapse of sentiment; it is forced selling.
Why might it not just be a small pullback? Because the current market position is not low, and leverage is significant. When everyone assumes 'money is always cheap', a change in rules usually leads to adjustments that are not gentle.
Historically, many significant market declines have not been due to high interest rates, but rather because funds suddenly realized they were on the wrong path.
What does this mean for the cryptocurrency market? In short: volatility will be amplified. The higher the leverage, the quicker the downfall; altcoins will drop first, mainstream coins will follow, and after a period of sideways movement, there will be a sudden accelerated decline. This isn't about projects failing; it's about money exiting the market.
A rise in interest rates by the Bank of Japan may not immediately trigger a global market crash, but it is likely one of the switches for risk release.
Don’t bet on the market’s mercy; managing your positions proactively is far more important than accurately predicting the direction.
Pay attention to: LIGHT EPIC AVAAI OM NAORIS
