Your account suddenly evaporated tens of thousands, probably related to the news from Tokyo. The Bank of Japan slightly adjusted the Benchmark Interest Rate up from 0.25%, and the entire Crypto Assets market instantly fell into a panic dumping, with trillions of funds experiencing severe fluctuations in a short period.

At the moment the trading interface was opened, the market was simply shocking. Bitcoin fell below the psychological barrier of $90,000, and Ethereum plummeted simultaneously. As for those smaller altcoins? They were basically crushed without any power to fight back in this wave of impact. Many investors' instinctive reaction was: another whale is harvesting retail investors. But this time, the truth is not so simple—the real trigger is hidden in the policy meeting room of the Central Bank of Japan.

The market generally expects the Bank of Japan to raise the interest rate to 0.5% at the December monetary policy meeting. This seemingly insignificant adjustment of 25 basis points is, however, a serious blow to the crypto market.

Why can the Japanese yen interest rate hike trigger a seismic shift in the crypto space? The answer lies in the past few years of arbitrage frenzy. Japan has long maintained an ultra-low interest rate environment close to zero, which has become a cash cow for global speculative capital. A large number of hedge funds and institutional investors frantically borrowed low-cost yen, converted it into US dollars, and then quickly entered into Bitcoin, Ethereum, and other crypto assets, reaping the dual dividends of exchange rate and asset price differences. The scale of this yen carry trade is astonishing, supporting half of the bull market in the crypto space over the past few years.

But now the rules of the game have changed. Japan's interest rate hike means that borrowing costs have soared, and arbitrage opportunities have been rapidly compressed or even disappeared. Those leveraged funds can only choose to cut off their arms to survive: sell crypto assets, recover US dollars, exchange for yen, and repay debts. When trillions of yen in arbitrage positions start to close at the same time, market liquidity dries up instantly, and prices naturally plummet.