A major signal has recently caused a stir in the market—Bank of Japan Governor Kazuo Ueda publicly stated that if economic and inflation data continue to improve, the central bank may consider further interest rate hikes. This is not just casual talk; it points to the long-standing yen arbitrage trading chain that has troubled global financial markets for years.

You need to understand this arbitrage game: large amounts of capital borrow low-interest yen and then invest in US stocks and cryptocurrencies. When the Bank of Japan actually raises interest rates, the cost of borrowing skyrockets, risking a break in this global capital chain. What does this mean for the crypto world? The answer is liquidity tightening.

Look at the current market situation. Last week, US Bitcoin and Ethereum ETFs experienced nearly $1 billion in fund withdrawals—this is a signal from major institutions that they are observing and waiting. During the Christmas period, trading volume was already sluggish, liquidity was thin, and any small movement was amplified. Plus, the policy delay of the US “Clear Act” has further worsened market sentiment.

The harsh reality is: don’t expect a one-sided trend to develop in the short term. Risks of volatility and downward pressure are right in front of us.

So, how to respond specifically? First, adjust your positions. If you’re holding a lot right now, it’s time to gradually reduce some. Capital safety always comes first. Second, prepare cash. Consider converting some assets into stablecoins like USDC—this isn’t giving up, but rather stockpiling “ammunition” for potential opportunities ahead. When prices drop to a good level, you’ll be able to jump in. Third, select targets carefully. Pay attention to projects that continue to attract funds even during market panic—they tend to withstand tests.

The impact triggered by central bank policies is still ongoing. The true direction may only become clear after January next year, once the new US policies are finalized. The most important thing now is to hold the line and wait for the next clear signal.