2026-01-05 23:21:45

As we enter 2026, the global financial markets are signaling a key development—Bank of Japan Governor Kazuo Ueda publicly stated that the rate hike cycle is far from over, and monetary policy will continue to tighten in line with rising wages and prices.

What does this signal mean? Let’s look at the numbers first. Japanese interest rates have already surged to a 30-year high of 0.75%, and several institutions predict that the final rate could break through the 1%-1.5% threshold, implying at least 1-2 more rate hikes. On the surface, 0.75% seems modest, but the hidden risks behind it are gradually being recognized by the market.

The key issue is the $4 trillion yen arbitrage trade. Over the past few years, investors have generally followed a pattern: borrow yen at extremely low costs and then pour into high-risk, high-reward crypto assets like Bitcoin and Ethereum. This "free capital" has supported part of the liquidity in the entire crypto market. But now, with rate hikes, financing costs are rising, and this cheap money may start to flee.

History offers us clear warnings. After the Bank of Japan raised rates in July 2024, Bitcoin plummeted 23% within a week, and the crypto market directly evaporated $60 billion. In the previous three rate hike cycles, Bitcoin experienced over 20% retracements each time. This is not coincidence but a regular reaction.

The current situation is even more complex. On one side, the Bank of Japan is resolutely "withdrawing liquidity," while on the other, the Federal Reserve is divided over rate cuts. Global liquidity presents a bizarre "ice and fire" scenario—some places tightening, others loosening, with markets fluctuating amid this uncertainty.

Bitcoin is currently testing the psychological threshold of $90,000. On-chain data already shows signs of institutional pre-position reduction, but some analysts believe the market has already priced in the rate hike expectations. The Federal Reserve’s easing outlook might hedge some risks, and the market could rebound after "bad news" is priced in.

This is an unprecedented monetary policy shift in the past 30 years. Whether the crypto market will repeat a sharp decline or rise against the trend remains uncertain. Will you choose to reduce your holdings to hedge risks or to bottom-fish and position for a rebound?

BTC-0,14%

ETH0,15%

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DAOplomacy

· 01-08 18:47

ngl the 4 trillion yen carry trade unwind is the real story here, everything else is just noise... path dependency matters fr

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FlatlineTrader

· 01-07 15:20

The yen arbitrage has been爆了 for so many years, it's about time to seriously look at this account. To put it simply, it's a game of借鸡下蛋, and once the central bank pulls back, the game should be over. Machine: Institutions are secretly reducing their positions, and the signals couldn't be more obvious. How aggressive must one be to dare to catch the bottom at this point? Have all the bad news been digested? Hehe, I think this wave is just the honeymoon period of the rebound. The real test will come after breaking through $90,000. Operations not seen in 30 years, this time the gameplay is definitely different. With Japan and the US going against each other, and liquidity so bizarre, there are still people daring to go all in. I am truly impressed. Is it time to catch the bottom or reduce positions? After looking at the on-chain data, everyone's hands are trembling. Honestly, no one can predict the outcome of this situation right now.

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SchrodingerProfit

· 01-07 04:01

Yen arbitrage retreat, we really need to be cautious this time... --- $40 trillion can be withdrawn at any time, can our liquidity handle it? --- The probability of history repeating itself is quite high, but this time the Federal Reserve's attitude is the key... --- Reducing positions or bottom fishing, honestly, who can predict this stuff? --- Institutions are already fleeing, are some still rushing towards 90,000? --- The two extremes of ice and fire are spot on; the market's uncertainty is truly absolute. --- I remember the wave in July 2024; can it happen again this time? --- It feels different this time; the Federal Reserve might step in to save the market. --- Wait, will all $4 trillion really exit? That number is a bit frightening. --- Arbitrage funds fleeing might be more dangerous than the rate hikes themselves.

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digital_archaeologist

· 01-05 23:50

Japan has started "pumping" again. How quickly can the previously 4 trillion USD arbitrage funds run? Waiting to see how this drama at the 90,000 threshold unfolds.

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WhaleMinion

· 01-05 23:42

Japan's recent interest rate hike has really arrived. Are the $4 trillion arbitrage funds about to exit? What about us retail investors? We've lost the courage to buy the dip.

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MissedAirdropBro

· 01-05 23:41

Yen arbitrage has blown up. This wave is going to cause casualties.

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AirdropBuffet

· 01-05 23:37

40 trillion yuan in arbitrage funds need to run, this time we really have to be cautious --- Is Japan going to raise interest rates again? Then the cheap money from before has to be withdrawn --- With such obvious historical patterns, does anyone still dare to go all in? --- Can the Fed cut interest rates to save the situation? I doubt it, better to run first --- The 90,000 mark, it feels like institutions are secretly reducing their positions --- Such chaos with ice and fire, who bets and who dies? --- Instead of worrying about the rebound, it's better to preserve capital first, friends --- The lessons of 2024 are so close, do we have to repeat the same mistakes? --- Arbitrage funds fleeing, as long as this happens, all positive news is useless --- Is it bad news that triggers a rebound or continues to kill? I choose to wait and see --- A situation I haven't seen in 30 years, those who don't reduce their positions and instead leverage more are really brave --- The Bank of Japan is pumping liquidity, the Federal Reserve is also easing, the market is caught in the middle, let's just watch the joke --- 40 trillion yuan, everyone, that's real gold and silver, once moved, the entire army is wiped out --- Signals of institutions reducing positions are already out, what are we waiting for, a rebound? --- Bitcoin's push to 90,000 feels like a rebound, not a reversal

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