Last night's market did not disappoint — or rather, it was thoroughly disappointing. Bitcoin broke through support levels, directly smashing through the $86,000 mark, with a 24-hour decline of over 3%. The most painful data is this: nearly 180,000 retail traders worldwide were liquidated in the past day, with total losses reaching $594 million. Over 80% of those liquidations were long positions. This situation is truly a mess.

All signs point to the same event — the Bank of Japan's interest rate decision announcement this Friday. The market doesn't need much suspense; it's basically locked in a 25 basis point rate hike. Past data is enough to send chills down your spine: since March 2024, every rate hike by Japan has been followed by a poor performance in Bitcoin. In March, it plunged 23%; in July, it fell 26%; and by January 2025, it was even more severe, dropping 31%. Analysts are now saying: if they really hike this time, Bitcoin could directly head toward $70,000.

Why is the global financial market so sensitive to Japan's rate hike?

Simply put. Over the past few decades, Japan's interest rates have been basically at rock bottom, which has led to a worldwide pattern: yen arbitrage trading. The logic is simple — international investors borrow yen at extremely low interest rates, convert it into dollars, and then invest in higher-yield assets like US stocks, US bonds, or Bitcoin.

Imagine treating the yen as the cheapest, most fundamental fuel in the global capital markets. Now that the Bank of Japan is raising interest rates, it's like this fuel is becoming more expensive. What do institutions and big players trading cryptocurrencies with yen do? Their first reaction is to quickly cut losses and pay off debts, or else their costs will keep rising. So once the news of Japan's rate hike starts circulating, risk assets like Bitcoin usually can't escape the fate of being hammered down.