BTC started to pullback as soon as the weekly close was in, and it is about to approach the critical support at 85000. Previously, the market was focused on whether 90800 could hold above, but over the weekend, with the US on holiday and low volume, the price fluctuated just above 90800. Unexpectedly, the Bank of Japan suddenly released hawkish signals, suggesting a possible interest rate hike in December, which caused US stock futures to plummet, and BTC couldn't hold either, testing the lower support again.

Why does Japan's interest rate decision stir up the global market?
Data speaks volumes—Japan's 2-year government bond yield has already broken 1%, a rare level in many years. How does the market view this now? The probability of a rate hike in December exceeds sixty percent, and it even soars to ninety percent in January next year. Don’t underestimate this move. Japan has experienced thirty years of stagnation, maintaining zero interest rates and even negative rates for a long time, making the cost of borrowing yen ridiculously low. Consequently, various institutions are borrowing yen like crazy, converting it into dollars and euros to buy U.S. stocks and bonds, profiting from arbitrage (this is the legendary yen arbitrage trading).

Is Japan going to raise interest rates now? Then the cost of borrowing will soar directly. High-leverage players will have to liquidate their positions and cut losses immediately, selling U.S. stocks and government bonds to recoup funds. A large portion of global liquidity will be drained, and risk assets will naturally suffer. What’s worse is that the market is starting to worry: is Japan about to completely say goodbye to the era of monetary easing? That would be equivalent to hitting the brakes on the "liquidity printing machine" for the global market, and short-term shocks are unavoidable. Assets like BTC, which are sensitive to liquidity, will certainly be the first to be hit.

However, there is no need to panic excessively. Japan's interest rate hike is just a short-term disturbance; the real control over global liquidity still depends on the Federal Reserve. On December 1, the Federal Reserve announced the halt of balance sheet reduction, and on December 10, the probability of a rate cut in the FOMC meeting exceeded 80%, with the overall direction still being to inject liquidity. However, the U.S. government is currently in a shutdown.