Recently, everyone has been watching the Federal Reserve and inflation data, but don't overlook a more direct trigger— the Bank of Japan.

According to expectations, the Bank of Japan will raise interest rates on December 18-19. This seemingly routine move actually tends to stir waves in the crypto market each time. The last two rate hikes have been lessons in blood: after the July rate hike last year, Bitcoin fell by 26%; another one in January this year resulted in a 25% drop.

Why does it have such a big impact? Essentially, it's the backlash of arbitrage trading. Many investors borrow in yen to allocate risk assets, and when interest rates rise, the math no longer works. They start to close positions and sell off, first paying back yen loans. This selling pressure can instantly ripple through stocks and crypto assets.

In the short term, we may see a noticeable wave of price volatility. But there's an interesting logic behind this: Japan's economy is still there, with GDP shrinking, and the government just injected 17 trillion yen in stimulus measures to maintain liquidity. The central bank can't hold out much longer, and policies will eventually shift. Major global economies are currently easing, leaving room for long-term recovery.

After the turbulence, some weak hands will exit, and selling pressure will gradually be absorbed. Once the market rebuilds its foundation, the outlook for 2026 may become clearer. Short-term pain, long-term opportunity—that's the rhythm.