Family! This morning when I opened my eyes, my backend was full of messages asking, 'Japan raised interest rates, is the crypto market going to cool down?' Some even sent me a bunch of panic screenshots, which almost made me laugh!
First, the conclusion: don't let the emotional crowd in the market set the pace! This round of interest rate hikes in Japan seems like a 'big event,' but in reality, the market has already understood it thoroughly. If you think this will lead to a massive crash, you're probably overthinking it. Today, I'll use plain language to clarify the ins and outs of this situation and the core cards behind it. After reading, you'll definitely have a clear understanding!
First, let's lay out the core viewpoint: interest rate hikes are not a 'black swan'; they are a 'routine operation' that has long been anticipated.
Many newcomers become weak in the knees as soon as they hear 'interest rate hikes,' especially regarding Japan, an economy that has been quiet for many years, fearing it might trigger a global financial tsunami. But remember, the root of panic is the unknown, and this round of rate hikes is all based on 'known information,' so there's really no surprise.
The first key point: The market has already digested expectations. This isn't just my speculation; for the past six months, news about the possibility of interest rate hikes in Japan has been constant, with institutions and analysts repeatedly interpreting it, and related trading strategies have long been laid out. It's like a movie that has been spoiled in advance; when it finally releases, apart from a few trend-following retail investors, no one will genuinely be surprised. Expecting a sudden crash? Difficult!
The second key point: The Bank of Japan has made it clear about its 'bottom line.' They have explicitly stated that they will not engage in 'continuous large-scale interest rate hikes.' The first rate hike is expected to be minimal, and subsequent progress will also be slow. It's like a strong man saying, 'I'm going to hit you,' but only gives you a light tap and says, 'I'll take my time.' How intimidating can that really be?
Breaking down the risk points: Those 'crises' that have been blown up are actually just paper tigers.
Some say 'the yen carry trade is going to collapse and will trigger a liquidity crisis.' That might have had some merit two years ago, but now? It's entirely outdated rhetoric.
The old guard has checked the latest data, and the scale of yen carry trades is significantly lower than during the peak periods of the past two years. Thinking that large-scale concentrated liquidations could create liquidity issues? The probability is as low as randomly buying a meme coin and seeing it skyrocket a hundred times. Even if there are small-scale liquidations, the liquidity in global markets can absorb it, and the cryptocurrency market won't need to take the blame.
Some people are worried that 'the Japanese government's high debt could trigger defaults if interest rates rise,' which is even more misguided. Japan's level of debt looks scary on paper, but the vast majority is held by domestic entities, and the maturities are very long, so there is no issue of 'concentrated defaults.' More importantly, the Bank of Japan can buffer this with bond purchases, which is like having a 'safety net.' Default risk? At this stage, it can basically be ignored.
The key hedging point: The actions of the Federal Reserve are the true 'anchor of stability.'
When doing crypto analysis, you can't just focus on one country; you need a global perspective. Don’t forget, the Federal Reserve might still cut rates in the second half of the year! This point is crucial.
If Japan tightens its policies a bit, and the Federal Reserve signals easing, a global liquidity environment can form a hedge. For the cryptocurrency market, global liquidity is the real 'lifeline.' As long as the Federal Reserve doesn’t implement extreme tightening, Japan’s small interest rate hikes won’t stir up any major waves.
Let’s emphasize: what we really need to focus on is not 'interest rate hikes,' but the subsequent statements.
Let me emphasize again: the market will not collapse just because of this interest rate hike. The real risk is not the rate hike itself, but whether the Bank of Japan's subsequent statements will 'go off track.'
If they later change their tone and say they want to accelerate the pace of rate hikes or increase the magnitude, that would be a signal to be cautious; but as long as they maintain the current 'gradual' approach, there’s no need to panic. In crypto investing, we must learn to grasp the main contradictions and not be disturbed by irrelevant noise.
To summarize: This round of interest rate hikes in Japan is just 'a loud thunder with little rain;' the market has already digested it quite well, so there’s no need to panic excessively. The next focus should be on two points: first, the subsequent statements from the Bank of Japan, and second, the Federal Reserve's signs of interest rate cuts.
The old guard will also continue to monitor these two core signals, and as soon as there is any sign of change, I will promptly update everyone. If you think my interpretation is thorough and not misleading, give a thumbs up and follow!
