Family, there's an emergency! The Bank of Japan's interest rate hike is about to explode, and the crypto market is sitting on a volcano. The leverage risk is ridiculously high. Before the Bank of Japan meeting on December 19th, please don't rush to buy the dip!
The Bank of Japan's interest rate hike signal is clear, and the probability has surged, but there are differing opinions on the magnitude.
According to authoritative sources from the Securities Times, Bank of Japan Governor Kazuo Ueda has explicitly stated that the December 19th meeting will thoroughly assess the possibility of raising interest rates. Market sentiment suggests that a rate hike is now over 80%, practically a done deal. However, opinions differ regarding the magnitude of the rate increase.
The baseline scenario is a high probability of a 25 basis point rate hike, bringing the rate to 0.75%, the highest level since 1995. If inflation data is higher than expected, the Bank of Japan might react aggressively with a 50 basis point rate hike. Of course, there are exceptions; if the rate hike is delayed, short covering might occur, potentially causing a market rebound.
Yen Carry Trade: Full of Hidden Dangers, Risks Can Erupt at Any Moment
Japan's 30 years of ultra-loose monetary policy has created the world's largest arbitrage trade. Investors can borrow yen at virtually no cost and then pour it into profitable assets like US stocks and cryptocurrencies. Data from CoinDesk shows that when the Bank of Japan raised interest rates in July 2024, Bitcoin plummeted by 23% that day, resulting in over $20 billion in liquidations across the network. The leverage is still substantial; Coindesk tracking reveals that nearly $1 billion in leveraged cryptocurrency positions are at risk of being liquidated at any time—the risk is immense.
Leverage varies greatly among different currencies, and key support levels should be kept in mind. Different currencies have different sensitivities to leverage, and key support levels and risk levels also have their own characteristics.
BTC is highly leveraged due to concentrated institutional holdings. Its key support level is $85,000, indicating a high level of risk; please exercise caution when trading.
ETH leverage is extremely sensitive and is a major area of concern in DeFi leverage. The key support level is at $2,600, where the risk level is extremely high, and even a slight misstep could lead to serious problems.
SOL has moderate leverage sensitivity and is favored by Asian funds. The key support level is $180, and the risk level is medium to high, so caution is still advised.
History may repeat itself, but times have changed.
Real Vision CEO Raoul Parr warned that yen carry trades are the world's largest macro leverage strategy, and that once liquidated, stocks, bonds, and cryptocurrencies will all suffer. However, there are differences between 2025 and 2024.
The market is now anticipating interest rate hikes three months in advance, unlike the sudden hike in July 2024, so everyone is somewhat prepared. Furthermore, the leverage structure is different; exchange data shows that open interest has decreased by 40% from its 2024 peak. There's also a policy buffer; the Fed is expected to cut rates in 2026, which can offset any sudden and significant reduction in dollar liquidity.
Remember these steps before December 19th.
Leveraged traders, quickly reduce your contract leverage to below 3x and keep an extra 150% margin as a buffer to avoid being forced to liquidate your positions.
Spot holders should set tiered stop-loss orders. For example, for BTC, setting two stop-loss levels at $85,000 and $80,000 can reduce losses.
Opportunists, get your USDT ready. If BTC drops below $82,000 after the interest rate hike, buy in batches and you might just snag a bargain.
The Bank of Japan's interest rate hike will undoubtedly have a significant impact on the cryptocurrency market. When trading, everyone must remain calm and avoid blindly following the crowd. Develop strategies based on your own risk tolerance; otherwise, you may end up losing everything and regret it later.
At this time, the Yellow Emperor will lead everyone to ambush with a small amount of ETH, expecting to earn 200 points without a problem. Friends who want to catch this big opportunity, come to the chat room.
