There is big news coming from this side of life!
I just received information that the Bank of Japan has stated that an interest rate hike in the December meeting is basically a done deal. Their governor even explicitly mentioned that if they raise rates this time, they will continue to do so in the future, aiming to push the interest rate to a neutral level that is neither too hot nor too cold; currently, this level is estimated to be between 1% and 2.5%. The market is currently betting on a 90% probability of them raising rates this month!
My opinion is:
Don't underestimate this matter! This is not a simple interest rate hike within Japan. Over the past decade, the yen has been the cheapest "financing currency" in the world, with countless international hot money borrowed in yen and exchanged for dollars to buy U.S. stocks or Bitcoin, earning interest differentials.
Now that Japanese interest rates are rising, the cost of this money will increase, and many arbitrage trades will have to be closed, starting with selling off high-risk assets—such as cryptocurrencies—to convert back to yen to pay off debts. Therefore, this directly impacts the "tap" of the global market!
What impact does this have on the cryptocurrency market?
Short-term shocks are unavoidable: once the interest rate hike is implemented, global funds will tighten, and market sentiment will first be impacted. Do you remember Bitcoin dropping over 6% in one day a couple of days ago? Part of the reason was this.
Don't panic; the script may be "fall first, stabilize later": based on historical experience, during the initial phase of such macroeconomic shifts, Bitcoin, due to its good liquidity, will be sold off first. However, after the sell-off, its hedging property as a "super-sovereign asset" will be remembered by more people, and it may stabilize or even strengthen again.
Keep an eye on these two indicators: one is the yen exchange rate, and the other is the yield on U.S. Treasury bonds. When these two move, the flow of global funds will change accordingly.
What should retail investors do now?
Market sentiment is already weak. Before the interest rate hike actually occurs, volatility will definitely increase, and being overly leveraged makes it easy to be swept away in one wave. My strategy is to observe more and act less; don't be too aggressive with your positions. Wait until the market digests this news and clarifies the new flow of funds before seeking opportunities.
If you want to know how the market moves immediately after the Bank of Japan's decision is announced, and my personal specific response strategy, follow me, join Tianji Pavilion, and we will discuss on the platform!
