The shoe of interest rate hikes has dropped, and the cryptocurrency world hasn’t collapsed, but rather shows a glimmer of light. This is not just luck, but a script that was calculated precisely long ago.
On December 19th, Beijing time, the Bank of Japan announced as expected to raise the benchmark interest rate from 0.5% to 0.75%, reaching the highest level in nearly 30 years since 1995.
However, the market presents an interesting picture: the yen fell instead of rising, with the USD/JPY briefly climbing above 157; Bitcoin instead rose by 1.6% to $86,994.
Why did a significant event that should have triggered a 'liquidity earthquake' ultimately only stir up a small ripple? As someone who has been observing global macroeconomics for three years, I will clarify the underlying reasons for you today.
01 The market has already digested the obvious strategy in advance.
The reason the Bank of Japan's interest rate hike did not create a major storm is fundamentally due to four words: fully anticipated.
48 hours before the announcement, the overnight index swap market showed a 94% probability of a 25 basis point rate hike, while the prediction market platform Polymarket even showed this probability reaching 98%.
This is akin to playing mahjong where everyone knows what card you are going to play next, naturally losing the element of surprise.
Looking back at the three interest rate hikes since 2024 (March 2024, July 2024, January 2025), each was accompanied by a decline of over 20% in Bitcoin. But this time the outcome is completely different, the core being 'known risks are not risks.'
What the market fears most is not bad news, but uncertainty. When the probability of a rate hike approaches 100%, all panic sellers have already acted in advance, and when the news actually lands, it instead creates a 'bad news has run its course, good news follows' effect.
02 The 'hawkish claw' is hidden in the velvet glove of interest rate hikes.
Bank of Japan Governor Ueda Kazuo displayed a superb art of expectation management after announcing the interest rate hike. Although he raised interest rates, he clearly stated that 'the actual interest rate will remain at an extremely low level' and promised that the accommodative financial environment will continue to support economic activity.
This 'hawkish yet dovish' strategy successfully avoided market panic.
More critically, even if the interest rate rises to 0.75%, Japan's interest rate level remains far below the 'neutral rate' recognized by the Bank of Japan (1%-2.5%), and is also significantly lower than the U.S. federal funds rate (4.25%-4.5%).
This explains why the yen did not appreciate but rather depreciated after the interest rate hike: the interest rate differential remains huge, and arbitrage trading still has room to survive.
Ueda Kazuo wisely extended the decision-making time for the next interest rate hike to the fiscal year 2026 and closely linked rate hikes to economic data. This effectively tells the market: 'Don't worry, we will take it slow.'
03 Why does the crypto market show astonishing resilience?
Bitcoin's counter-trend rise after the interest rate hike announcement is backed by deep structural reasons.
Data shows that the U.S. spot Bitcoin ETF recorded a net inflow of $457.3 million on December 18, the largest single-day fund inflow since November 11. This indicates that institutional capital is positioning itself at low prices, rather than fleeing in panic.
From on-chain data, Glassnode shows that 23.7% of Bitcoin supply is in a loss state, but these losses are shifting from short-term holders (13.5%) to long-term holders (10.2%), which is actually a signal of confidence accumulation.
Meanwhile, Bitcoin's dominance has risen to 60%, reaching the highest level since November 14. This indicates that during market volatility, capital is more inclined to flow into relatively stable Bitcoin, rather than higher-risk altcoins.
'Virtual money' (leveraged funds) is retreating, while 'real money' (long-term funds) is holding firm, which is a sign of a healthy market structure.
04 The reconstruction of the global liquidity landscape is the larger context.
To truly understand the impact of this interest rate hike, we need to broaden our perspective and look at the overall picture of global liquidity.
Currently, global central bank policies are showing a rare divergence: the Federal Reserve and the Bank of England continue to maintain an easing pace, announcing rate cuts of 25 basis points this month. In contrast, the Bank of Japan is hiking rates against the trend, reflecting the differences in the economic fundamentals of various countries.
The easing of inflationary pressures in the U.S. (November CPI rose 2.7% year-on-year) provides space for the Federal Reserve to continue cutting interest rates. Meanwhile, Japan's core CPI has been above the 2% inflation target for 44 consecutive months, making a rate hike an inevitable choice.
This means that although Japan is tightening liquidity, the Fed's rate cuts have somewhat offset its impact. The global liquidity environment has not sharply contracted due to interest rate hikes in a single country.
05 Practical advice for ordinary investors
Based on the above analysis, I have several clear judgments for everyone's reference:
First, do not be fooled by short-term fluctuations. The core contradiction in the market has shifted from 'interest rate hike shock' to 'fundamental reshaping'. Reliance solely on narratives and emotions to drive the market will gradually fade, and capital will pay more attention to real application value.
Secondly, focus on structural opportunities. If the Bank of Japan's subsequent statements are moderate, market risk appetite may quickly rebound. However, if more hawkish signals are released, high-leverage altcoins may be the first to suffer. Bitcoin remains the choice with stronger safe-haven attributes.
Finally, keep a calm mind. The cash holdings of global fund managers have fallen to a historic low of 3.3%. This means the 'ammunition' in the hands of institutions is limited, and the market may be more sensitive to negative news.
But this also proves that a large amount of capital has been allocated to risk assets, casting a vote of confidence for the long-term trend.
So, what should we look at next? Ueda Kazuo has hinted that if the economy and prices develop as expected, the Bank of Japan will continue to raise the policy interest rate. The market expects that interest rates may be raised again as early as June or July next year.
However, today's market response has proven a simple truth: the most dangerous part is often not the news itself, but people's overreaction to the news.
Those who panicked and sold before the interest rate hike are now slapping their thighs in regret. Meanwhile, those seasoned investors who stayed calm have already seen through this as just a reoccurrence of past cyclical fluctuations.
In this information-overloaded market, maintaining calm is more important than anything else.
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