While many traders remain focused solely on the FED, an even quieter risk is forming in Asia: the possible rate increase from the Bank of Japan (BoJ). An event that, if confirmed, could become one of the largest liquidity shocks for the crypto market in recent years.
Japan has been the source of the cheapest money in the world for decades. And that cheap money has been the invisible fuel for much of the rises in Bitcoin and altcoins.
Today, that fuel is in danger.
🏦 Cheap yen: the root of billions that reached the crypto market
For years, large funds and whales used a simple strategy:
They were borrowing in Japanese yen at almost zero rates
They converted that yen to dollars
And they were placing it in high-risk assets: tech stocks, derivatives... and cryptocurrencies
This mechanism, known as carry trade, injected massive liquidity into the crypto ecosystem without most of the public noticing.
But if the Bank of Japan raises rates, that money stops being cheap.
And when money stops being cheap... capital flees from risk.
💸 Rate hike in Japan = direct liquidity outflow from Bitcoin and altcoins
A BoJ adjustment does not only affect Japan. It causes a global domino effect:
*Closure of positions financed in yen
*Reduction of leverage
*Forced sale of risk assets
Repatriation of capital to Japan
In the crypto market, this translates to a single real consequence:
📉 fewer purchases, more sales and price drop due to lack of liquidity.
📉 Cryptocurrencies: the market that suffers the most when liquidity dries up
Bitcoin and altcoins do not rise due to corporate balances or profits.
They rise due to excess speculative capital.
When liquidity contracts:
Bounces become weak
Volume decreases
The rises are just distribution zones
And the whales sell every impulse
In an environment of liquidity withdrawal from Japan, cryptocurrencies are left without their main driver: cheap global money.
⚠️ The great danger for LONGS in this scenario
The greatest current risk is not in the shorts...
🩸 It is in excessively confident LONGS.
When liquidity is withdrawn:
Bullish movements lose continuity
Breakouts become traps
Long upper wicks appear
And cascading liquidations begin
The longs opened in high zones, without solid structural confirmation, are exposed to:
❌ Violent sweeps
❌ Liquidations from rapid movements
❌ False impulses created just to hunt leverage
❌ Capital destruction from overconfidence
In markets with dwindling liquidity, leverage ceases to be an advantage and becomes a trap.
🧠 Market psychology: optimism at its most dangerous phase
This is the most critical point of the cycle:
The price still holds
The networks remain optimistic
Many believe that 'the worst is over'
And the longs are accumulating en masse
But when the macroeconomy shuts off the liquidity tap, the market does not warn twice.
First it drains positions... then it shows the real drop.
🎯 Conclusion: Japan can trigger the next crypto bear wave
If the Bank of Japan confirms an increase in rates accompanied by a withdrawal of monetary stimulus, the message for the crypto market will be forceful:
👉 One of the last sources of cheap liquidity in the world is closing.
And without liquidity:
The risk ceases to be attractive
Cryptocurrencies lose momentum
Leveraged longs get trapped
And each bounce becomes a selling opportunity
> The crypto market does not fear the news.
Fears that money will stop flowing.
