The Bank of Japan's rate hike operation has become the last straw that broke the camel's back. Mainstream cryptocurrencies plummeted across the board, retail investors are in despair, and this sudden shock actually stems from a massive withdrawal of yen arbitrage funds— a brutal reshuffle of global capital flows.

Fundamentally, this sharp decline is no coincidence. Japan's long-term low interest rates have nurtured the world's largest arbitrage fund pool. Borrowing cheap yen and turning around to invest in high-risk assets like cryptocurrencies to earn spreads, many of the crypto market's gains are supported by this "hot money." Now that Japan has entered an interest rate hike cycle, the cost of yen financing has skyrocketed, and these arbitrage funds have instantly changed course—selling off assets from BTC, ETH to SOL to recover principal and pay debts. Data speaks volumes: BTC down 4.05%, ETH down 6.87%, smaller tokens like ASTER even plunged 9.71%, a clear sign of capital fleeing.

But blaming Japan's rate hike as the culprit behind the crypto market crash oversimplifies the issue. The crypto market itself was already riddled with problems: previous mainstream coins had surged too much, with technical overextensions creating significant pullback demand; leverage positions within the market piled up like a volcano, ready to trigger chain liquidations; regulatory rumors, large investors adjusting their holdings, and internal disturbances have only added fuel to the fire. The market is in a fragile state of "any poke will break," and Japan's rate hike was just the fatal shot. The real crisis stems from the crypto market's own deep-seated issues.