Your account balance suddenly shrinks by tens of thousands, and the driving force behind it may not be a market maker manipulating the market, but rather a policy message from Tokyo — the Bank of Japan is preparing to raise the benchmark interest rate from 0.25% by a small step, and as a result, the entire crypto market collapses like a house of cards.

The moment you open the market software, the sea of red can make one feel anxious. Bitcoin has fallen below the 90,000 mark, and Ethereum has followed suit with a steep drop. As for those altcoins? They are basically in a dire state. Many people's first reaction is: Are the market makers harvesting again? But this time it’s not that simple, the real culprit is hiding in the meeting room of the Central Bank of Japan.

Market rumors suggest that the Bank of Japan may raise the interest rate from 0.25% to 0.5% in December. You might wonder how much of an impact a mere 0.25 percentage point increase can have? The problem lies here—this minor adjustment is like suddenly pulling away the foundation for the crypto market.

Why has the Japanese yen policy caused chaos in the crypto market? The answer lies in the arbitrage frenzy of the past few years. Japan has long maintained near-zero interest rates, attracting global speculative funds that flocked in to borrow the low-cost yen, converted it into US dollars, and then surged into digital assets such as Bitcoin and Ethereum. The scale of this practice is beyond your imagination, and the bull market in the crypto market a few years ago was undoubtedly fueled by yen arbitrage trading.

But now the rules of the game have changed. Once Japan raises interest rates, the cost of borrowing yen will skyrocket, and the previously risk-free arbitrage opportunities will disappear in an instant. What can those leveraged funds do? They can only painfully sell off their crypto assets to exchange for yen to repay their loans. When thousands of accounts simultaneously sell off, how can the market withstand such selling pressure? A price crash is almost inevitable.

What's even worse is that the crypto market itself is a high-leverage playground. A slight drop in price can trigger large-scale liquidations, which in turn leads to more intense sell-offs. Once panic spreads, the stampede effect cannot be stopped at all.

This situation is particularly delicate: Japan is tightening its monetary policy while the United States may loosen its monetary policy. When the policies of these two major economies are at odds, market fluctuations are often amplified to the extreme. Additionally, the leverage in the crypto market is higher than before, and once a collapse occurs, the decline will be even more astonishing.

However, it must be said that there are often opportunities hidden in the sharp declines. History has repeatedly proven that after market panic selling, there will always be a recovery period. The real key is to maintain your mindset and not give up your chips during the most panicked times. After all, the deepest pits are often the best opportunities.