Just now, the Bank of Japan unanimously approved a rate hike of 0.75%, the most aggressive move since 1995. It may seem normal on the surface, but behind it involves $4 to $5 trillion in yen arbitrage trading.

In simple terms, Japan has maintained zero interest rates for decades, and once it takes a serious step, the entire global financial system will shake. Why? Because global investors have been borrowing cheap yen to buy US bonds, US stocks, and high-liquidity assets like $BTC, $ZEC, and $BCH. Now that financing costs are rising and yen appreciation expectations are emerging, this trade no longer makes sense.

How will capital move? Very simply—sell off overseas assets and repatriate funds to Japan. BTC, as the riskiest asset, has already felt the impact. Historically, after Japan's rate hike in July 2024, BTC plummeted 23% in one week. This time? Before the rate hike, BTC was already volatile with a 5.5% single-day swing, and $600 million in leveraged longs were liquidated. Although BTC later rebounded to $87,000, institutional holdings data shows funds are quietly deleveraging.

Even more concerning, $23 billion in options are expiring, which will further amplify volatility. Plus, while the Federal Reserve is reversing rate cuts, Japan is raising rates against the trend. What does this policy divergence hide? The US is harvesting gains—Warren Buffett's yen-based investments in Japanese companies are the best proof.

But there's a bigger issue. Japan's debt-to-GDP ratio is as high as 263%, with the central bank holding 55% of government bonds. When rates rise, government interest payments will surge directly. Can Japan withstand continuous rate hikes? Will Japanese bonds collapse? These questions hang like swords over the global markets.

For us, don't get confused by short-term rebounds. Keep your position in any single coin below 20%, monitor ETF fund flows and yen exchange rates closely, and hedge risks with put options. Most importantly, watch whether Japan will initiate a real tightening cycle—this is the key factor that will determine global liquidity.