Folks, today the Bank of Japan did something significant: it raised the policy rate from 0.5% to 0.75%, hitting a 30-year high. This decision seems distant, but its impact on the crypto market may be more direct than you think. As a veteran investor, I’d like to share my personal view.
1. Why is Japan's interest rate hike worth watching?
Inflation pressure: Japan's core CPI has exceeded the target of 2% for 44 consecutive months, rising to 3% in November. Simply put, prices cannot be suppressed, and the central bank must take action.
Yen depreciation is too harsh: The yen is weak, import costs have surged, and the interest rate hike aims to support the exchange rate.
Global liquidity tightening: Japan has long been the source of 'cheap funds', but now the faucet is tightening, and those borrowing yen to invest in stocks or buy cryptocurrencies must recalculate.
2. What is the impact on the crypto market?
I believe it is bearish in the short term, but not necessarily a bad thing in the long term.
Short-term pressure sources:
Arbitrage trading liquidation: Many people borrowed low-interest yen to buy high-yield assets (like Bitcoin). After the interest rate hike, financing costs rose from 0.5% to 0.75%, narrowing the interest rate spread, which could trigger sell-offs.
Liquidity withdrawal: Japanese investors are the largest overseas holders of US debt (about $1.2 trillion), and interest rate hikes may bring funds back to Japan, with emerging markets and high-risk assets (like cryptocurrencies) being the first to feel the impact.
Emotional panic: The market fear index has been in the 'extreme fear' zone for 47 consecutive days. Once the interest rate hike triggers leveraged liquidations, Bitcoin may test the support levels of $80,000-$85,000.
But don't panic! This time may not repeat 'Black Monday':
The market has long anticipated this: the probability of an interest rate hike skyrocketed from 20% at the beginning of December to 94%, and panic has been partially digested.
Arbitrage scale reduction: After the sharp decline in August last year, short positions in the yen have decreased, and leverage is not as extreme.
The Federal Reserve is cutting rates: The dollar's easing offsets the yen's tightening, and global liquidity is not as fragile as last year.
3. My operational thoughts
Reducing leverage: Short-term volatility may intensify, and high-leverage contracts are prone to liquidation.
Focus on Japan's capital movements: If retail and institutional investors in Japan (like Metaplanet, which holds nearly 19,000 bitcoins) reduce their holdings due to rising costs, it will create selling pressure. However, in the long term, Japan's stable inflation may instead drive funds to seek safe-haven assets, highlighting Bitcoin's 'supra-sovereign' nature.
Gradual deployment: If Bitcoin falls below $85,000 due to panic, I would consider picking it up at a lower price. Historical experience shows that the impact of interest rate hikes is often a short-term pitfall.
4. Summary
Japan's interest rate hike is a turning point in the era, but the resilience of the crypto market is stronger than expected. Instead of panicking, focus on two points:
Yen exchange rate: If the yen remains weak after interest rate hikes (for instance, if the USD/JPY holds above 155), it indicates limited policy effectiveness and that the bearish sentiment has mostly played out.
Federal Reserve trends: If the US accelerates rate cuts next year, funds may re-embrace risk assets.
Personal view: The market always finds a bottom in despair; this pullback may be a golden opportunity for the second half of the year. Stay calm and don't let emotions sway your strategy.
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