Folks, the biggest news in the market today is that the Bank of Japan has finally raised the interest rate to 0.75%, a 30-year high! As an old investor, my first reaction is: 'The coffin board for arbitrage trading is about to collapse!' But thinking calmly, is this rate hike really that scary? Let me break down a few key points and discuss its impact on the crypto market.
1. Behind the interest rate hike: Has Japan really 'awakened to inflation'?
Japan's core CPI has exceeded the target of 2% for 44 consecutive months, rising to 3% in November, with cabbage prices even doubling. But to be honest, this wave of inflation is mainly imported—yen depreciation has pushed up import costs, coupled with the highest wage increase in 34 years.
Rather than saying that interest rate hikes are proactive, it's more accurate to say they are 'forced.' The Japanese government has relied on ultra-low interest rates for many years, but now that inflation can't be contained, they can only address the immediate pressure on people's livelihoods.
2. Will the yen surge? Don't be too optimistic!
Theoretically, interest rate hikes should lead to the appreciation of the yen, but the market has already digested the expectations. After today's interest rate decision, the yen against the dollar actually fell to 156[doge]. Why? Arbitrage trading is not dead yet! Players borrowing yen to buy high-yield assets will not easily withdraw as long as the interest rate spread exists.
In the short term, the yen may fluctuate, but relying on it to beat the bears? Difficult! Unless the Federal Reserve accelerates rate cuts, the interest rate differential between Japan and the U.S. will still be significant.
3. The 'butterfly effect' in the global market
Japanese investors are the largest overseas holders of U.S. debt (about $1.2 trillion) and also invisible big players in the crypto market. After the interest rate hike, funds may flow back to Japan, leading to two types of impacts:
U.S. debt sell-off: Japanese institutions may reduce their holdings of U.S. debt, pushing up global borrowing costs.
De-leveraging in the crypto market: Once arbitrage trading using yen to buy coins is closed, it can easily trigger a chain liquidation.
Don't panic! This rate hike is different from the 'Black Monday' in August 2024—market expectations are fully priced in, and the scale of leverage has also been reduced. Rather than worrying about a crash, it's better to focus on Bitcoin's support level of $80,000–85,000; if it breaks below, then consider exiting.
4. Insights for the crypto market
Short-term pain is unavoidable: If history repeats itself, Bitcoin may correct by 15–25%, and altcoins may drop even more.
In the medium to long term, it may actually be an opportunity: Japan's interest rate hike means a shift in global liquidity, but the 'supra-sovereign nature' of the crypto market will become more prominent. For instance, the Japanese listed company Metaplanet has already accumulated 18,888 Bitcoins, and this type of institutional allocation is what will support the future.
Buy the dip in batches, focusing on BTC and ETH. Rather than betting on direction, it's better to save some ammunition to pick up bargains when the market panics!
Folks, the market is always about 'buying expectations, selling facts.' The play of Japan's interest rate hike has gone on for so long that when it actually happens, it may instead result in a negative effect. Remember this: 'Risks emerge from rises, opportunities arise from falls.' Rather than being led by the news, it's better to check your leverage and positions; surviving allows you to wait for the bull market.
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