Brothers, the whole internet is betting on a 25 basis point cut by the Fed tonight, but to be honest—this good news has long been fully priced in by BTC, which has risen from 80,000 to 94,000! Those who are waiting for the official announcement tomorrow night are merely retail investors attending a conference. The real eye of the storm is actually hidden in Tokyo: next week, the Bank of Japan may raise interest rates, and that could be the hidden nuclear bomb that drains global liquidity!
Why is a yen interest rate hike scarier than a Fed rate cut?
The 'cardiac arrest' of global carry trades
In the past twenty years, everyone has been playing the same game: borrowing Japanese yen at near-zero interest rates to buy U.S. Treasuries/U.S. stocks/cryptocurrency, making a guaranteed profit from the interest rate spread! The premise of this logic is that the yen must be 'both cheap and stable.' But once Japan raises interest rates, financing costs will soar, coupled with expectations of yen appreciation, everyone will have to frantically close their positions—selling U.S. Treasuries, selling U.S. stocks, selling BTC, and converting back to yen to repay debts! This chain reaction is comparable to the 'liquidity vacuum cleaner' of the 1998 Asian financial crisis.
Data doesn’t lie.
The current scale of generalized yen carry trade has reached 19.2 trillion USD (5 times Japan's GDP!), and Japan is still the largest foreign creditor of the U.S. (holding 1.19 trillion USD in U.S. Treasuries). As long as Japanese bond yields continue to rise, domestic funds in Japan may return to the homeland, and U.S. Treasuries will be hit first. What’s the result? U.S. Treasury yields will be forced to rise, and global risk assets (especially overvalued tech stocks and BTC) will all accompany them to the grave!
Historical lessons are bloody.
In August 2024, an unexpected interest rate hike by the Bank of Japan directly triggered the unwinding of carry trades: the Nikkei index plummeted 12% in one day, and Nasdaq fell 11%, with global assets evaporating by 6.4 trillion USD in three weeks. The current scenario feels familiar—Federal Reserve cuts rates, Japan hikes rates, but this time market leverage is more hidden, and when it blows up, it could be more severe.
Current market: everyone is betting on the open cards, but the hidden cards are in Japan's hands.
Federal Reserve interest rate cut: the market pricing has fully digested it, and even if Powell is dovish tonight, BTC could spike to 96,000 and it might instantly be 'good news fully absorbed'. What’s scarier is 'hawkish rate cuts'—saying one thing about fighting inflation while honestly cutting rates; this kind of split signal will directly hit market confidence.
Japan's interest rate hike: Governor Ueda Kazuo has already stated that 'the December meeting will weigh interest rate hikes', and market expectations have soared to 80%. The key is that this time the Bank of Japan has learned to be smart, giving a heads-up half a month in advance, but the extent of the interest rate hike and subsequent pace remain real unknown risks.
Hidden bomb: if the U.S. CPI data unexpectedly spikes next week, combined with Japan's interest rate hike, it would mean 'high inflation + liquidity withdrawal' double whammy, and volatility could break through the charts!
My strategy: avoid open guns and defend against hidden arrows.
Don't chase highs for BTC/ETH in the short term.
From a technical perspective, BTC faces strong resistance in the 94,000-95,000 range, and ETH also faces retracement pressure at 3,300. If the Federal Reserve is dovish tonight, take the opportunity to reduce positions and lower leverage; if hawkish, directly test the 88,000 support level. Remember: when liquidity withdrawals happen, high leverage dies the fastest!
Focus on two indicators.
USD/JPY exchange rate: if it falls below 155 (currently reported at 156.7), it indicates an acceleration in the unwinding of carry trades, so run quickly.
U.S. 10-year Treasury yield: if it spikes above 4.3% after Japan's interest rate hike, risk assets are highly likely to collectively plunge.
Opportunities exist after the 'wrongful killing'.
If the market panics excessively due to Japan's interest rate hike, it could instead be an opportunity to buy the dip—especially for ETH after the staking ETF approval, and BTC which institutions are continuously accumulating. But the premise is: survive until the liquidity shock ends!
Lastly, let’s speak human words.
The Federal Reserve's interest rate cut is the 'appetizer', while Japan's interest rate hike is the 'main course'. Right now, the market is like a group of kids crowding at the door trying to grab candy, with no one noticing the reservoir behind them is about to flood. My advice: don’t be greedy tonight, and don’t be afraid next week—if you avoid the first wave of panic, you will be qualified to pick up the bloody chips.
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