After the Bank of Japan raised interest rates, the cryptocurrency market's reaction did not follow the straightforward path of 'bearish sell-off.' Before the policy was announced, the market had already dropped, clearly pricing in the potential risks of the rate hike; however, when the dust actually settled, Bitcoin managed to stabilize above the $88,000 mark, and Ethereum's rebound was even more impressive. The entire rhythm was particularly clear—first panic, then gradual digestion.
The underlying logic isn't that complicated. Japan raised interest rates to a nearly 30-year high, and Bitcoin didn't collapse; it even touched above $88,000, while Ethereum also followed with a rebound. Interestingly, not all major coins kept pace; BNB and SOL's gains were rather mundane. To put it simply: a rate hike is indeed a signal of tightening liquidity, but the market won't just blindly sell off at the mention of 'Japan's rate hike.' Investors' focus remains on core variables like U.S. dollar liquidity and American economic data.
The real core cannot avoid the old logic of 'Yen carry trading.' There used to be a smooth play: borrowing low-cost yen to buy dollar assets or risk assets like Bitcoin, earning from both interest rate differentials and asset appreciation. However, once expectations for a rate hike in Japan heat up, the cost of borrowing yen increases, and the yen may appreciate, significantly reducing the attractiveness of this carry trade. This forces many leveraged funds to cut their risk positions, and assets like Bitcoin, with high beta characteristics, are often the first to be sold off.
This is why we saw the market rhythm previously: before the decision was finalized, the market preemptively deleveraged and fell; when the policy was actually announced, the market rebounded instead. The key to how the cryptocurrency market will move next still depends on the trends from the United States.
