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During the Asian trading session on December 1, a sudden liquidity earthquake caught global investors off guard. The hawkish signals released by Bank of Japan Governor Kazuo Ueda in a public speech directly pushed the expectation of a rate hike in December to 64%—what does this number mean? It means that funds relying on low-interest yen arbitrage are experiencing a collective withdrawal.

The Nikkei 225 index closed below 49,300 points on the day, with a daily decline of nearly 2%. More concerning is the bond market: the yield on 10-year Japanese government bonds soared to 1.85%, marking the first time it has reached this level since the global financial crisis in 2008. The yield on 2-year government bonds also broke through the psychological threshold of 1%. As the market re-prices Japanese assets, it has also cut back on risk appetite.

The reaction in the cryptocurrency market is more direct. Bitcoin fell from above $90,000 to below $86,000 within a few hours, a drop of more than 5%. Major cryptocurrencies like Ethereum and Dogecoin also declined simultaneously, with a drop of over 5%. Data shows that approximately 210,000 accounts were forcibly liquidated within 24 hours, involving funds exceeding $639 million. Such a scale of liquidation usually only occurs in extreme market conditions.

Why do adjustments in the Bank of Japan's policies trigger such dramatic chain reactions? The core issue lies in the unwinding of yen carry trades. For many years, a large amount of capital has entered high-yield assets—such as U.S. stocks, emerging market equities, and cryptocurrencies—by borrowing low-interest yen. When expectations for yen interest rates rise, this capital must flow back to repay debts, and the cryptocurrency market, due to its relatively weaker liquidity, often becomes the first asset to be sold off.

The Asia Volatility Index ( VIX ) surged 23% in a single day, further confirming the level of panic in the market. Currently, the impact of tightening liquidity is still in the fermentation stage. If the Bank of Japan really raises interest rates in December, there may be more volatility to come.

For cryptocurrency investors, it is now essential to pay extra attention to position management. High-leverage operations carry extreme risks in this environment. At the same time, closely monitor the yen exchange rate trends — it has become one of the important indicators for assessing short-term market sentiment. Maintaining sufficient cash reserves may be the safest strategy in the coming weeks.