Many people have overlooked the significance of the recent rate hike by the Bank of Japan.

From last year to early this year, Japan has taken action three times: once in March 2024, again in July, and still ongoing into January 2025. The magnitude may not seem large, but don’t underestimate this country’s position in the global financial system.

For decades, Japan has played the role of a "cheap funding provider." The long-standing zero-interest-rate and negative interest rate policies have effectively turned it into a low-cost capital pool for global finance. Overseas investors and arbitrage traders rely on this interest rate differential to operate. Now, this "ATM" is starting to withdraw money, and a chain reaction is unavoidable.

Looking at historical data makes this clear. After the first three rate hikes, Bitcoin’s performance was a decline of 23%, 26%, and 31%, respectively. This is no coincidence — yen arbitrage funds are flowing back, risk appetite is rapidly declining, and the market’s sensitivity to liquidity conditions is at its peak.

However, this time, the story is a bit different.

The market has already priced in the possibility of this rate hike, digesting expectations in advance through trading. The impact is no longer a black swan event but a known risk. What’s truly worth watching is not whether the central bank will continue to raise rates, but how far this trend can go, and where the bottom line of global risk assets’ tolerance to tightening lies.

There’s no need to be overly pessimistic. Japan’s rate hike is indeed a tightening signal, but whether it can trigger the same deep adjustments as before is still uncertain. The market has evolved, and trading logic is changing. This may not be the same old script.