The market always has a way of teaching us, but today it gave us a lesson: when bad news is exhausted, it becomes good news.
The Bank of Japan has just passed a resolution with a voting result of 9:0, raising the benchmark interest rate from 0.5% to 0.75%, reaching a 30-year high since 1995. According to traditional logic, tightening global liquidity should lead to a decline in risk assets, but Bitcoin has instead risen by 1.6% to $86,994.64, and Ethereum has also increased by 3.3%.
What is even more surprising is that the yen not only did not strengthen after the rate hike, but the USD/JPY pair surged short-term to break 157, reaching a one-month high. What secrets are hidden behind this operation? What exactly are the main funds calculating? As an analyst who has been tracking the cryptocurrency market for a long time, I will take you to uncover this layer of fog.
Why did the market rise despite negative news? What tricks are being played?
The market follows the classic logic of 'buy the expectation, sell the fact.' Over the past month, discussions around Japan's interest rate hike have become a consensus in the market, with all 50 surveyed economists predicting that the Bank of Japan will take rate hike action this time. The futures market has priced this in early, and funds have adjusted their positions ahead of time.
When the shoe truly drops, it eliminates uncertainty. What makes people anxious is never the event itself, but the waiting period for it to happen. As pointed out by the co-founder of Glassnode, the market fears not tightening, but uncertainty.
The global liquidity environment has not truly deteriorated. Even with Japan raising rates by 25 basis points, real interest rates remain significantly low, and the Bank of Japan has promised that the accommodative financial environment will continue to support economic activity. This 'hawkish with a dovish twist' policy signal alleviates concerns about a sharp contraction in global liquidity.
The U.S. inflation data also provides a buffer for the market. The U.S. Consumer Price Index rose 2.7% year-on-year in November, below the market expectation of 3.1%. The alleviation of inflationary pressures provides space for the Federal Reserve's subsequent rate cuts, contrasting sharply with Japan's interest rate hike, indicating that global monetary policies are not tightening in sync but are showing divergence.
Technical signals reveal short-term rebound momentum
From a technical perspective, Bitcoin has received strong support at key positions. On the daily level, Bitcoin has entered the statistically extreme panic zone of Z-Score-2, but the RVWAP spot cost line has not yet been breached, which is different from the typical bear market patterns of 2018 and 2022. This 'panic first, not broken' pattern may indicate that the market adjustment is nearing its end rather than the beginning of a bear market.
Analysts point out that Bitcoin's Relative Strength Index (RSI) is nearing 30 on the weekly chart, an area that has closely aligned with bottoms in past market cycles. Although this does not guarantee the start of a new bull market, it at least indicates a potential temporary reversal.
It is worth noting that Bitcoin's dominance has risen to 60%, the highest level since November 14. This indicates that during market volatility, funds are more inclined to flow into relatively stable Bitcoin rather than higher-risk altcoins. This 'safe-haven' capital flow provides strong support for Bitcoin.
What are the main funds quietly doing?
Looking at the market is not about watching prices, but about observing the flow of funds. By analyzing the movements of the main capital, I discovered an interesting phenomenon.
Data shows that the U.S. spot Bitcoin ETF recorded a net inflow of $457.3 million on December 18, the largest single-day inflow since November 11. Among them, funds from Fidelity and BlackRock's Bitcoin funds performed particularly strongly. This indicates that institutional investors are not retreating due to Japan's interest rate hike, but rather are using market volatility to increase positions.
The average cash holding in global fund managers' portfolios has dropped from 3.7% in November to 3.3%, the lowest level since the survey began in 1999. On the positive side, this indicates that funds continue to flow into risk assets, acknowledging the current market environment; on the negative side, the 'bullets' for institutions to actively increase positions are limited, and future market rises may rely more on stock fund rebalancing or retail investors entering the market.
Large funds are quietly using the drop and volatility to accumulate positions; they are not in a hurry to pull prices up immediately. This 'zigzag' accumulation method often indicates that there may be a significant market movement later.
How does the crypto market respond to changes in global liquidity?
Looking back at Japan's monetary policy shifts in recent years, its impact on risk assets is gradually weakening. In March 2024, Japan will raise interest rates for the first time in 17 years, ending the negative interest rate policy, but the market has digested this early, and Bitcoin is performing steadily.
After this interest rate hike, even if Japan's policy rate rises to 0.75%, it is still far below the 'neutral rate' (1%-2.5%) recognized by the Bank of Japan itself. This keeps real interest rates at extremely low levels, making it difficult to attract substantial capital back to Japan. As long as the USD/JPY exchange rate does not fall below the critical level of 152, the yen is still viewed as being in a weak range, meaning the cost of borrowing yen is relatively low, and global capital may continue to use yen as a financing currency to invest in high-risk assets.
The correlation between the crypto market and traditional assets is also changing. Although Bitcoin's correlation with the Nasdaq 100 index recently rose to about 0.8, as Bitcoin's own ecosystem develops and its application scenarios expand, it is no longer a purely risky asset but is gradually becoming an independent asset class. This is also why Bitcoin can display independent trends against the backdrop of Japan's interest rate hike.
My views and operational strategies
As an analyst who has been tracking the crypto market for a long time, I believe it is not appropriate to be overly pessimistic now, but neither can we be blindly optimistic. The fact that Japan's interest rate hike has eliminated one uncertainty does not mean the bull market will happen overnight.
For investors in different situations, I offer the following advice:
For holders: continue to hold, but do not blindly increase positions. Pay close attention to the defensive situation at the two critical levels of 88000 and 85000. It is better to stay still than to act rashly before the direction is clear.
For those with no positions: you can adopt a 'range oscillation' strategy, trying light longs in the 85500-86000 range and light shorts in the 87800-88800 range. Remember, these are light tests, not heavy bets.
Key action point: If the price firmly stabilizes above 88000, consider following up with long positions after a pullback; if it breaks below 85000 with increased volume, be wary of further downside risks.
In the medium term, I remain optimistic about Bitcoin. Citigroup recently set Bitcoin's 'base case' target price at $143,000, emphasizing that $70,000 is a key support level. This prediction is based on the judgment of a recovery in ETF demand and optimistic market expectations.
The market always specializes in treating various dissatisfaction. In the current environment, protecting capital is more important than pursuing profits. If you feel that watching the market is too exhausting and you always miss the market's rhythm, feel free to follow me for further communication.#巨鲸动向 $ETH
