Will the Bank of Japan's interest rate hike be finalized? Is the cryptocurrency market about to change? ⚠️ A signal of a drop followed by a rise?

The interest rate hike in Japan on December 19 is basically a done deal! Market expectations have soared to 88%! 📈 This move could significantly impact the crypto market, whether for short-term trading or long-term holding —

🔴 Short-term warning: Cryptocurrency prices will face pressure, be careful of leverage liquidation!

• $4 trillion of arbitrage funds are set to flee.

The yen has been at ultra-low interest rates for years, making it the world's largest arbitrage currency, with approximately $4 trillion flowing into Bitcoin and other crypto assets. Now, with the cost of borrowing rising after the interest rate hike, this portion of funds will definitely flow back from the crypto market to Japan. Once liquidity is withdrawn, prices will inevitably be pressured. It’s worth noting that when Ueda hinted at an interest rate hike in early December, Bitcoin dropped from $90,000 to $84,000. Short-term corrections in BTC and ETH are unavoidable, and altcoins with poor liquidity will drop even more sharply!

• A wave of liquidation could reoccur.

After the yen appreciates, those borrowing in yen to trade cryptocurrencies must quickly sell their assets to repay debts, easily creating a vicious cycle of “selling → price drop → forced liquidation.” By the end of December, nearly $1 billion in leveraged positions had been liquidated. If the interest rate hike is finalized, we might see a repeat of the $20 billion liquidation scene from October 2024. Who can withstand this volatility!

🟢 Mid-term opportunity: Could Bitcoin “drop first then surge”?

Don’t panic! In the long run, there may be a turnaround. The monetary policies of the U.S. and Japan are currently completely reversed — the Federal Reserve is cutting rates while Japan is raising rates. This divergence could trigger exchange rate fluctuations and sovereign risks. Meanwhile, Bitcoin's attribute as a “supra-sovereign asset” will stand out, as a highly liquid asset that can be transferred globally, it may experience a pattern of dropping first and then rising.

📌 Will local Japanese funds enter the market?

The interest rate hike has led to the appreciation of the yen, making it cheaper for Japanese investors to buy dollar-denominated crypto assets. Moreover, Japan has recently been optimizing Web3 regulations and has relaxed policies for companies holding crypto assets. Local compliant funds may become new inflows in the Asian cryptocurrency market. 💰