A phenomenon that seems to defy financial common sense is unfolding.
In 2025, when the Federal Reserve pressed the interest rate cut button three times in a row, and the balance sheet expanded again, Bitcoin did not soar as expected, but instead 'lay flat' for half a year within the narrow range of $80,000 to $90,000. Ethereum's trading volume bizarrely shrank by 30%, and the entire market seemed to have been pressed on pause.
This is not a simple technical adjustment, but a global liquidity rebalance that is significant enough to be recorded in history. The silence of the market stems from a capital black hole in Japan that is largely ignored by most people.
The Forgotten 'Mother of Cheap Money'
Over the past two decades, the Bank of Japan has pushed ultra-easy policies to the extreme, creating an empire of 'yen arbitrage' worth over $12 trillion. Global hedge funds, institutional investors, and even retail investors are enjoying this capital feast: borrowing yen at almost zero cost, converting it into dollars, and flooding into high-yield assets like Bitcoin and U.S. stocks, effortlessly earning dual benefits of interest rate spread and appreciation.
This invisible capital forms the underlying cornerstone of risk assets, yet also buries a fatal hidden danger.
Currently, Tokyo's core CPI has exceeded the 2% target for 18 consecutive months, soaring to 2.8% in November 2025, with food prices rising by as much as 38.5%. The inflation beast has finally torn the mask off Japan's deflation era. Bloomberg's survey shows that 100% of analysts polled bet that the Bank of Japan will raise interest rates to 0.75% in December. This is no longer a question of 'whether to raise rates' but a panic about 'how fast the rate hikes will be'.
When certainty becomes consensus, arbitrage traders begin to retreat in panic.
In December 2025, Bitcoin crashed to $84,000, directly resulting from institutions selling crypto assets to repay yen-denominated debts. The Federal Reserve's 'water release' is like filling a leaky bathtub; as soon as it comes in, it flows to Japan, a massive drain. The traditional theory that 'easing must raise risk assets' has completely failed at this moment.
Policy Divergence: The most feared scenario in the crypto market
This is not the first time. The Mundell-Fleming model has long warned: under an open economy, the coordination of central bank policies determines the flow of capital.
• In 1998, the Federal Reserve's interest rate cuts combined with the Bank of Japan's tightening made the capital flight during the Asian financial crisis vividly memorable;
• In 2022, the Federal Reserve's aggressive rate hikes and Japan's steadfast YCC policy resulted in a 30% depreciation of the yen, while the crypto market plummeted by 60% due to the exhaustion of dollar liquidity;
• Today, history is mirroring itself — the Federal Reserve's easing is not as strong as expected (the rate cut pace in 2025 is 50 basis points slower than the market expects), while the Bank of Japan's 'drain' effect is even more destructive.
As the end of the risk curve, the crypto market is most sensitive to changes in liquidity. Gate data shows that in 2025, the cryptocurrency leverage ratio has dropped to 2.3 times, a three-year low. Institutions are not waiting for some 'starting gun' but are actively avoiding risks. This caution is a rational evasion of the uncertainties in policy games.
The Triple World Reconstruction After Rate Hikes
If the Bank of Japan raises interest rates as scheduled, the global market will undergo a century of reshuffling:
First Layer: Exchange Rate Tsunami. The yen may experience its most intense appreciation since 1998, with the dollar falling below the 130 mark against the yen, leading to a chain devaluation of emerging market currencies. This is not a prediction but an inevitable result of the reversal of arbitrage trades.
Second Layer: Capital Migration. The yen's unwinding tide will continue to suppress the crypto market and U.S. tech stocks, while Japanese government bonds and blue-chip stocks will become the new favorites of global capital. Morgan Stanley has boldly predicted that the Japanese stock market may rise by 15% in 2026.
Third Layer: Polarization of the Crypto Market. Bitcoin, with its 'digital gold' attribute, may exhibit stronger resistance to declines, while altcoins lacking fundamentals may face declines of over 40%. When rate hike expectations heat up in August 2024, the decline of the altcoin index will be twice that of Bitcoin, and this time it will be even more brutal.
The far-reaching impact lies in the shift of global liquidity dominance from the Federal Reserve's 'unipolar' to a 'bipolar' system between the U.S. and Japan, marking the most significant shift in monetary policy paradigms since the Plaza Accord of 1985.
Finding a New Anchor Point in the Pain
History has repeatedly proven that the liquidity reconstruction during periods of policy divergence is often accompanied by severe pain.
• In 1998, the collapse of Long-Term Capital Management due to yen arbitrage triggered global financial turmoil;
• In the 'taper tantrum' of 2013, the Federal Reserve's policy shift led to an outflow of over $500 billion from emerging markets.
The current sideway movement in the crypto market is an early digestion of this potential risk. Leveraged funds are retreating, speculative bubbles are clearing, and the market is completing a painful 'blood transfusion'.
But there is always light behind the dark clouds. As the Federal Reserve's easing cycle continues and the Bank of Japan completes its policy normalization, global liquidity will eventually find a new equilibrium. At that time, the driving force of the crypto market will shift from 'policy speculation' back to 'value creation' — real application scenarios, spot holding demand, and technological innovation dividends will replace fragile leveraged funds, becoming the true engine of the new cycle.
Conclusion: The Choice in the Eye of the Storm
This liquidity tug-of-war is essentially a necessary pain of global monetary policy transitioning from 'unilateral easing' to 'multilateral game'. The silence of the crypto market is not death but a recalibration of pricing anchors in the fog of policy.
History does not repeat itself, but it always rhymes. When the Bank of Japan's rate hike finally lands, short-term volatility is inevitable, but the return to long-term value will eventually come. For each of us participants, rather than predicting when the storm will end, it is better to think about how to survive and position ourselves in the storm.
How do you view this global capital shadow war? Do you think Bitcoin can consolidate its 'digital gold' status in this reshuffling? Feel free to leave your opinions in the comments section. If you think this article provides a unique analytical perspective, please like, support, share it with more friends, and follow us@币圈掘金人 , so you don't miss the next in-depth analysis of the global macro market.
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