These days, everyone on social media is discussing the Japanese Central Bank's interest rate hike, and some are already shouting "cash out and escape the top." But I think we should look at this matter rationally.

This Thursday and Friday (December 18-19), the Bank of Japan is very likely to raise interest rates by 25 basis points, increasing the rate from 0.5% to 0.75%. Market predictions estimate a 98% probability, so there's basically no suspense.

So the question is—how much will this impact the crypto market?

**The core logic is actually quite simple**

Over the past few decades, global investors have been playing an arbitrage game: borrowing Japanese yen at near-zero cost, converting to USD or other currencies, then buying high-yield assets like U.S. bonds, U.S. stocks, or Bitcoin. The Japanese call this "arbitrage trading," and participants range from large institutions to retail investors like "Mrs. Watanabe."

Now, when the Bank of Japan raises interest rates, the cost of borrowing yen immediately increases. More importantly, rate hikes usually lead to yen appreciation, which directly compresses arbitrage opportunities. Rational investors will start acting: selling their crypto assets → converting back to yen → repaying debts. This series of actions causes funds to flow out of the crypto space.

**What does history say?**

The previous three times the Bank of Japan raised interest rates, Bitcoin indeed experienced significant declines over the following 4-6 weeks. After the March 2024 rate hike, Bitcoin fell by 27%; the July rate hike that year showed similar performance. The data is clear—closing arbitrage positions is a real phenomenon.

But will this time replicate history? Not necessarily. The current market environment, the scale of funds, and risk appetite are different from the past. Instead of blindly following panic, it’s better to think more about the real scenarios that might unfold after this rate hike.