BTC broke through the $86,000 mark today, and many people thought it was just another round of regular Whipsaw. But I kept an eye on the 76% probability given by the traders and spent a few hours digging through the clues - it's not that simple.

The core variable is in Japan. On December 18-19, the Bank of Japan may raise interest rates, with market bets as high as 76%; by January next year, that number skyrockets to 90%. The recent statements from the Bank of Japan governor have also become increasingly clear, with the two-year government bond yield reaching its highest point since 2008. Under inflationary pressure, Japan really can't hold on any longer.

The question is, why can Japan's interest rate hike overturn the cryptocurrency market?

The answer lies in "carry trading." For the past few decades, Japanese interest rates have been close to zero, and global capital has been frantically borrowing low-cost yen, converting it into dollars or other currencies, and investing in U.S. stocks, real estate, and cryptocurrencies to earn interest differentials. The scale of funds supported by this play is conservatively estimated at $14 trillion, and more aggressively, it could reach $20 trillion. The price of BTC also reflects the shadow of this money.

But once Japan raises interest rates, the game changes instantly. The yen appreciates, and investors must close their carry positions—selling off their assets to convert back to yen for repayment. Hundreds of billions of dollars flow back to Japan, and global liquidity tightens instantly. High-risk assets? Cryptocurrencies are the first to be sold off.

What's worse is that the central bank's interest rate hike means that risk-averse sentiment will rise, and funds will withdraw from highly volatile assets like BTC and turn towards traditional safe-haven tools such as bonds. The financing environment in the crypto industry will also tighten, and both project parties and investment institutions will have to tighten their belts to get by.

Market data has started to speak. Today BTC fell below 86000, and major cryptocurrencies generally dropped over 5%, with over 400 million in long positions liquidated. Looking at a longer timeframe, BTC's decline in November exceeded 20%, with ETF funds continuously flowing out, and liquidation data coming in waves. The current market is very fragile, leveraged bulls have been cleaned out, and even long-term holders and whales are reducing their positions.

What should we do in terms of operations? Don't rush to buy the dip in the short term; volatility will be severe before the Bank of Japan meeting. In the medium term, keep an eye on the Federal Reserve. If they lower interest rates, BTC may have a rebound opportunity; but if they maintain a hawkish stance or do not lower rates, then it will continue to be under pressure. In the long term, this is not the end of the world—historically, the impact of unwinding carry trades has been one-time, and the market will ultimately find a new equilibrium.

Remember a few key time nodes, control your position well during this period, and don't blindly go all in.