I watched the analysis of Japan's interest rate hike by the co-founder of Glassnode.
I agree with his viewpoint; I won't repeat what has been said, but I will share some of my interpretive angles.
But my perspective is 👇
🤖 The impact of Japan's interest rate hike on risky assets, especially the cryptocurrency market, is quite limited
The main reasons are as follows:
1. This is not Japan's first interest rate hike; there were already hikes in March and July of last year, 2024.
2. Although this interest rate hike is basically confirmed, it is only raised to 0.75%, which is still very low.
Currently, the U.S. rate is 3.88%. Even with a rate hike, Japan's interest rates remain very low, and Japan will continue to control the extent of rate hikes and their impact.
3. On the other hand, the U.S. has started a quantitative easing interest rate cycle, dropping from 3.88 to 3 in a few years, forming a hedge against Japan.
4. This interest rate hike is the first in nearly a year after 24 years of rate increases, but the Governor of Japan's central bank has already 'predicted' several times that it is not a sudden negative surprise; the market has digested it for a long time.
So, there is no need for everyone to panic excessively. My view, which is also consistent with many friends I've talked to recently, is that👇
😈 We are far from the bear market of 2022; this is still a correction period in a bull market. After a period of fluctuation, crypto will still take off, leading to a healthier bull market.
Let's elaborate on one point.
Why is everyone so concerned about Japan's interest rate hike? The reason is that many institutions have been playing a 'borrow to invest' game in Japan for the past few years.
The reason is that Japan has been in a negative interest rate era for the past few years, with the 10-year Japanese government bond yield target set around 0%.
This has led many people to borrow money in Japan and invest that money in some risky markets, such as U.S. stocks or crypto.
The premise of this strategy is that the yen exchange rate must remain stable or depreciate, because once Japan raises interest rates, their costs will increase.
Currently, this scale is between 1 trillion to 5 trillion USD, but this range is quite broad.
Everyone should consider that this money is first distributed to different countries, such as Europe, the U.S., and South Korea, but there is no doubt that the U.S. is the largest recipient.
In fact, the money flowing into the U.S. still needs to be distributed further, whether it goes into U.S. Treasury bonds, U.S. stocks, or crypto.
Finally, we also need to consider the leverage issue. This 1 trillion to 5 trillion could be the statistical figure after leverage has been applied, and after the trends following 10.11, everyone should also understand that.
Currently, the leverage in crypto has been significantly cleaned up, and the money that can influence crypto after layers of distribution may be quite limited.