Do you remember the earth-shattering market turbulence of 2024? On July 31st, the Bank of Japan made an unexpected decision—raising interest rates to 0.25%. This move seemed moderate on the surface, but it actually ignited a global financial fuse.

The most immediate reaction was the surge of the Japanese Yen. But behind this was a more deadly chain reaction. A large amount of arbitrage trading based on low Japanese Yen interest rates (commonly called Yen carry trades) was suddenly forced to be liquidated on a massive scale. These funds, which were originally flowing into global risk assets, are now fleeing.

ETH was hit hardest. During the week in early August, the market plunged into a frenzy of selling. From the range of $3,270-$3,370 at the end of July, it fell all the way down to the $2,520-$2,600 range, with a low of even $2,340. The decline was about 22-25%, which is no small adjustment. The entire crypto market followed suit, with declines exceeding 20%.

The most terrifying aspect was the leverage effect. Many long positions borrowed to increase their leverage faced liquidation, further amplifying the decline. This was not just a simple price drop but a release of systemic risk. Judging by the intensity of that event, it was indeed one of the most severe shocks in recent years.