Did you feel the stampede on December 1st? Bitcoin fell over 5% in a single day, with Ethereum leading a group of mainstream tokens plummeting, over 200,000 people got liquidated and exited. The traditional market didn't escape either - the Nikkei 225 index was a sea of green, while the yen strengthened against the dollar, and the yield on Japan's 2-year government bonds hit a new high.

What is the trigger behind this? The hint from the Bank of Japan Governor saying "there may be an interest rate hike." Traders have already voted with their feet: the probability of an interest rate hike at the policy meeting on December 19 has been bet at 76%.

Many people do not understand: what does Japan's interest rate hike or not have to do with Bitcoin? This brings us to the "Yen Arbitrage Game" that has existed for 30 years and has a scale of 20 trillion dollars.

The logic is simple: borrow yen at close to zero interest rates, convert it into dollars to buy high-yield assets (such as U.S. Treasury bonds, U.S. stocks, and of course, cryptocurrencies), and profit from the interest rate spread. Sounds like a sure win? Indeed, countless institutions, hedge funds, and even retail investors around the world are playing this game. How exaggerated is the scale? It's equivalent to 5 times Japan's GDP, 18% of the global GDP, and one-third of the total market capitalization of the U.S. stock market—this is not a small pool; this is a Pacific-level influx of funds.

But now, the rules of the game have changed.

What will happen once the Bank of Japan really raises interest rates? Borrowing costs will rise, and the appeal of arbitrage will diminish; the yen will appreciate, meaning more dollars will need to be spent when repaying; caught in the squeeze, arbitrage traders will have no choice but to close their positions—leading to a massive sell-off of their risk assets. Stocks will be sold, bonds will be sold, and Bitcoin will also have to be sold.

This is not a theoretical deduction; it really happened. Do you remember August 5, 2024? The sudden interest rate hike by the Bank of Japan caused a collective plunge in the global market, and Bitcoin suffered as well. It took a full three weeks for the market to recover. Now, history may be repeating itself.

In the short term, if there is indeed an interest rate hike on December 19, Bitcoin is likely to test the range of $80,000 to $85,000. If arbitrage trading continues to close positions, global liquidity will tighten in the medium term – which is not good news for all risk assets.

So what should we do? A few basic principles:

**Reduce Leverage**. Now is not the time to open high-leverage contracts; surviving is more important than making quick money.
**Set Stop Loss**. Don't hold onto hope, cut it if you have to.
**Hold Cash**. When liquidity tightens, cash is king.
**Diversify your investments**. Don't put all your eggs in one basket, especially when systemic risks are approaching.

What if Bitcoin rebounds in the short term and arbitrage trading warms up? Don't chase the highs; reducing positions at high points is the wise choice—after all, the medium-term interest rate hike pressure is still there. If the Bank of Japan raises interest rates but simultaneously releases dovish signals (for example, hinting that this is the last rate hike), Bitcoin may experience range-bound fluctuations. At that time, consider building positions in batches, but make sure to keep an eye on the Federal Reserve's dynamics.

The timing is crucial:
- **By December 15**: Leverage reduction window period
- **Around the 19th**: Minimize operations, mainly observe.
- **After the 20th**: Adjust strategy based on meeting results

There is another signal: the yen exchange rate. If the yen falls below 150, beware of a new round of selling; if it returns to 160, the pressure will temporarily ease.

Ultimately, the plummet on December 1st was essentially a chain reaction triggered by changes in global liquidity. August 5th was the first warning, and December 19th may be the second verification. Once the giant of yen carry trades reverses, no one can remain unscathed.

Prioritize capital preservation, build positions in batches, and set stop losses. Don't think about catching the lowest point - in the face of such a macro storm, surviving is victory.