The Bank of Japan has taken serious action this time, officially bidding farewell to negative interest rates. This news detonated like a deep-water bomb, directly causing an uproar in the global market.

Let's first look at how the traditional market is doing: The Nikkei 225 Index fell by 2.5% that day, and the yield on Japanese government bonds surged directly. Institutions relying on borrowing yen for arbitrage began to frantically close their positions, and the yen's exchange rate surged instantly. The problem is that this wave of shock does not just stay within Japan.

The cryptocurrency market has been directly affected. Bitcoin plummeted by 7% within an hour, breaking through the $90,000 mark. Even worse are the leveraged traders - over 210,000 liquidation events occurred across the network within 24 hours, with a liquidation amount reaching up to $310 million. Mainstream coins like Ethereum and SOL generally fell by over 10%, with bulls being directly harvested.

Why is the Bank of Japan's interest rate hike this time scarier than the Federal Reserve's actions?

First of all, how many institutions and large players around the world have been borrowing Japanese yen at zero cost for a long time, and then investing in high-yield targets such as US stocks and the cryptocurrency market? Now that financing costs have skyrocketed, these positions must be liquidated, and this is the root cause of the chain reaction.

Secondly, the balance sheet size of the Bank of Japan is the largest in the world, and its reduction of the balance sheet withdraws liquidity more aggressively than the Federal Reserve. The most critical point is that this marks the complete collapse of the last bastion of loose monetary policy in the world, and the era of cheap money is truly over.

Looking back at history, in 2018, the Bank of Japan only made slight adjustments to its yield curve control policy, and Bitcoin plummeted by 40%. This time it is a complete policy shift, and the impact will be even greater. All assets financed in Japanese yen will face continuous selling pressure going forward.

What to do now? Here are a few suggestions:

First, quickly reduce the leverage, preferably below 1x, and avoid becoming one of the next batch of liquidation targets.

Second, monitor the USD/JPY exchange rate. If it breaks 152, it may trigger a larger-scale liquidation.

Thirdly, if conditions permit, gradually convert into Bitcoin and Ethereum spot, staying away from those high-leverage contracts.

Fourth, keep some cash on hand. In the next week or two, there may be the best buying opportunity of the year, but the prerequisite is that you have to survive until then.

The liquidity inflection point has arrived, and how the market will move next depends on the subsequent actions of the Central Banks.