How much impact do major events like the Bank of Japan's rate hikes have on cryptocurrencies such as Ethereum and ETH? It seems simple on the surface, but the actual transmission pathways are quite complex and need to be analyzed from several dimensions.

**How will liquidity be affected**

Japan has maintained zero or even negative interest rates for years. Global speculators have relied on the low cost of borrowing yen to convert funds into USD to earn higher yields — with the crypto market being a major profit zone. Once the Bank of Japan takes action and interest rates rise, the attractiveness of arbitrage diminishes. Funds borrowed in yen will start flowing back, tightening liquidity in global markets. For risk assets like Ethereum, this means short-term pressure.

Even more severe is the scenario where the Bank of Japan, Federal Reserve, and European Central Bank all tighten simultaneously. This "triple tightening" will create a strong tightening expectation across markets, significantly increasing volatility in risk assets.

**Market sentiment will shift**

Rate hikes by central banks are usually interpreted as signs of excessive inflation or an overheating economy. When this signal appears, markets tend to become more cautious. Speculative enthusiasm cools down, and the appeal of high-risk assets like cryptocurrencies diminishes. However, there's an exception — if the stock market is hit hard by rate hikes, some funds may instead flow into crypto markets for hedging opportunities. But this rebound is typically short-term; the medium to long-term depends on the overall market appetite for risk.

**What about Ethereum's fundamentals**

Honestly, Ethereum's outlook depends more on the development of its network itself. After the Cancun upgrade, Layer 2 performance has significantly improved, and the bottlenecks related to scalability and costs are being alleviated. These are the core factors that will determine ETH's long-term trend; the macroeconomic impact of rate hikes is ultimately temporary.