Will Japan's interest rate hikes affect the cryptocurrency market? My answer: definitely! The impact will also extend to the US stock market and A-shares because the Japanese yen has long been a crucial source of funding for global capital to 'stir things up' at nearly zero cost.

Take a look at the situation of Japan's three interest rate hikes over the past two years, and you'll understand how powerful it is:

  • On March 18, 2024, Japan ended its zero interest rate policy. As soon as the news came out, Bitcoin plunged 8.4%;

  • On July 31 of the same year, Japan raised interest rates for the second time, and Bitcoin dropped 16.3% within a week;

  • By January 23, 2025, the third interest rate hike saw Bitcoin's price fluctuate from $103,000 down to $76,000.

Currently, Japan's economic situation is also not optimistic; the 30-year government bond yield has soared to an unprecedented 3.36%, and the gap with the 10-year government bond yield is widening. The market has long sensed the dangerous atmosphere, and expectations for a Japanese rate hike are at an all-time high, just waiting for the shoe to drop. Once Japan really raises interest rates, the crypto market will surely experience a storm of blood and gore!

So now the real risk is not in the Federal Reserve, but in Japan!

In the past two months, Japan's government bond yields have skyrocketed: the 10-year yield has risen by 20%, approaching the highest point in 17 years; the 30-year yield has reached a historical high. For a country that has maintained a 0% interest rate for 20 years, this is not a small fluctuation, but rather the reopening of the era of interest rates.

Why is the world afraid of Japan raising interest rates? Last July, Japan's interest rates only rose slightly (0.1-0.25%), and the US stock market, Bitcoin, and Asian stock markets all collapsed. This time, it seems Japan is really going to raise rates.

Why must Japan raise interest rates? Because the Japanese economy has finally awakened after 30 years of silence: core CPI has exceeded 2% for several consecutive years, and wage growth has also reached a 30-year high. However, long-term low interest rates are starting to backfire: the yen depreciates, import costs soar, inflation intensifies, and wage increases are offset. To preserve economic recovery, Japan has no choice but to raise interest rates and return rates to normal.

What does this mean? For the past decade, a major support for the rise of global assets—the 'zero interest rate funding pool' from Japan—is about to close.

The core of the risk lies here: the global tens of trillions of dollars in yen carry trades are in jeopardy. Carry trading means: borrowing low-interest yen in Japan, converting it to dollars, and buying US bonds, US stocks, Bitcoin, and real estate. As long as the yen does not appreciate, profits can be made easily. But once Japan raises interest rates and the yen appreciates, this chain reverses: borrowed money becomes expensive, assets shrink, and forced selling occurs, causing global assets to fall together. This is not a wild guess; it has happened in reality before.

Why is the risk greater this time? The Japanese government bond yield can no longer be suppressed; the market is forcing the central bank to raise interest rates. The Bank of Japan's attitude has turned hawkish, and the market begins to expect Japan to enter an interest rate hike cycle, not just a one-time event. Additionally, the mismatch with the Federal Reserve's timing creates more uncertainty in capital flows, forming a negative spiral. Previously, assets like Bitcoin, US stocks, and gold have already overreacted to policy changes.

The globally relied upon 'super low-cost funding chain' is reversing, with shocks transmitting from the US stock market to cryptocurrencies, then to Asian markets, ultimately affecting global asset pricing.

So, don’t just focus on the Federal Reserve; Japan is now the big risk. We must be prepared for a possible break in the asset chain. Don’t rush to go all in; always set stop-losses!

Brothers, a strong coin that can explode to earn 10 times has arrived. In the next market, I will prepare for a big wave. This time, a successful all-in will definitely earn a fortune. If you want to witness it, join the chatroom.