On December 19, the Bank of Japan will hold a monetary policy meeting. The market expects it will raise interest rates by 25 basis points, increasing the policy rate from 0.5% to 0.75%. 0.75% doesn't sound high, but it's the highest rate in Japan in nearly 30 years.

In prediction markets like Polymarket, traders are pricing the probability of this rate hike at 98%. Why does a decision made by a central bank far away in Tokyo cause Bitcoin to drop by 5% within 48 hours? This relates to a concept known as "Yen carry trade."

The logic is quite simple: Japanese interest rates have been close to zero or even negative for a long time, making it nearly free to borrow yen. As a result, hedge funds, asset management firms, and trading desks globally have been borrowing large amounts of yen, converting it to dollars, and then purchasing higher-yielding assets, including U.S. Treasury bonds, U.S. stocks, and cryptocurrencies. As long as the returns on these assets exceed the cost of borrowing in yen, the interest rate differential is profit.

This strategy has existed for decades and has grown to a scale that is difficult to quantify accurately. Conservative estimates suggest several hundred billion dollars, and if derivative exposure is included, some analysts believe it could reach several trillion.

Additionally, Japan holds a special status: it is the largest foreign holder of U.S. Treasury bonds, with $1.18 trillion in U.S. debt.

This means that changes in the flow of funds from Japan will directly impact the world's most important bond market, which in turn will affect the pricing of all risk assets. #BTC走势分析