Recently, the Bank of Japan has issued several hawkish signals, hinting that the rate hike cycle may be extended, and the final interest rate could even surpass the 0.75% threshold. Once the news broke, global markets became noticeably more nervous. In simple terms, the Bank of Japan has no plans to stop, and interest rates will continue to rise, but exactly how high they will go remains uncertain—even to themselves.

For the crypto market, this is no small matter.

Japan has long been a major source of low-interest funds worldwide, especially for arbitrage trading that involves borrowing in yen at low rates and investing in high-yield assets, which is quite substantial in scale. If the Bank of Japan truly extends the rate hike cycle, the cost of borrowing in yen will gradually increase. As the yen becomes more attractive, a large amount of global capital may flow back into Japan, effectively draining liquidity from the markets.

Even more concerning is the macroeconomic backdrop. The Federal Reserve has paused rate hikes, the European Central Bank is on hold, but the Bank of Japan has started to sound hawkish. This is essentially a warning to the market: the era of global low interest rates is gradually coming to an end. This will reinforce market expectations—funds will become more expensive, liquidity will tighten, which is not helpful for high-risk assets like cryptocurrencies.

There’s also a more complicated issue. The Bank of Japan itself has not yet determined what the neutral interest rate is, meaning policy direction remains uncertain. The market will keep guessing and re-pricing, and each time the central bank makes a statement, it could trigger a risk-off sentiment, leading to increased volatility in global assets, including cryptocurrencies.

Regarding how this specifically impacts the crypto market, central bank statements won’t directly dictate trends but will exert ongoing pressure through three channels: fluctuations in USD/JPY exchange rate, changes in global liquidity expectations, and market risk sentiment. If later economic data from the US also shows strength, and central banks in Europe, America, and Asia begin to tighten collectively, the bullish trend will be significantly suppressed.

A few suggestions:

Keep an eye on the USD index and USD/JPY exchange rate, as these indicators directly reflect capital flow directions. During periods of tight liquidity, avoid high leverage trading, as central bank comments can easily trigger flash crashes. Lastly, remember that in a macro tightening environment, cash itself is a position. Maintaining sufficient liquidity reserves is key to seizing the next opportunity.

This doesn’t mean the bull market is over, but it will certainly be a stern test of your resilience and risk management execution.