The Bank of Japan is set to announce its monetary policy decision on December 19th. This rate hike will be a significant move for Japan in nearly 30 years. Although market rumors suggest the increase could be as high as 75 basis points, the mainstream expectation is that the central bank will raise rates by 25 basis points, increasing the benchmark rate from 0.5% to 0.75%.

At first glance, a 25 basis point increase may not seem like a big deal. But for the crypto market, this could be a turning point. For a long time, the low-interest-rate yen has been an ideal tool for arbitrage trading. The strategy is quite simple: borrow cheap yen to leverage and buy high-yield assets, with Bitcoin and Ethereum naturally becoming key targets. This group of arbitrageurs, known as the "Yen-backed debt party," has made a lot of quick money through interest rate differentials.

Now that interest rates are rising, the rules of the game have changed. As borrowing costs increase, arbitrageurs need to recalculate their strategies. A large amount of capital may withdraw from the crypto market and flow back to Japan to hedge risks. The result is that risk assets like Bitcoin will face selling pressure. The critical price level of $80,000 could become a focal point for the battle between bulls and bears.

The current state of the crypto market is somewhat delicate. A reduction in arbitrage trading could trigger a re-pricing of risk assets. Positions that once seemed stable might face forced liquidation risks. Altcoins are more affected because of their relatively weaker liquidity; once large funds exit, the downward momentum could be even stronger.

The key also depends on the attitude of Bank of Japan Governor Ueda Kazuo during his press conference. If he signals cautious rate hikes and a gradual approach, the market might view this adjustment as a transitional phase, with a short-term dip followed by a rebound. But if he hints at further significant rate hikes next year, the crypto market could experience a wave of intense volatility.

Before December 19th, there is a considerable probability that funds will exit early. Whether Bitcoin can hold the $80,000 support level, and whether altcoins will experience a collective plunge—these are critical issues to watch in the coming days.

In this crucial period, a prudent approach might be to retain some spot holdings for long-term allocation while keeping sufficient cash reserves to respond to potential declines. During market fluctuations, the pressure to monitor will be high, but overreacting is unnecessary; the market will always present opportunities for re-pricing.