The dumping that occurred yesterday morning may have been influenced by the expectations of interest rate hikes by the Bank of Japan. To be honest, despite the significant actions taken by domestic policies, they truly cannot compare to the impact of a small move in the yen's interest rate on the market.

Why should we take the Bank of Japan's interest rate decision in December seriously?

The reason lies in the role played by the yen - it acts like a "faucet" for global dollar liquidity. A large number of institutions borrow yen at ultra-low interest rates, exchange it for dollars, and then dump it into high-return assets. This strategy is called carry trade. The problem arises: once Japan tightens interest rates, these arbitrage funds will immediately withdraw, and liquidity will be instantly drained.

Most people's focus is solely on the Federal Reserve, while underestimating the destructive power of Japan's interest rates. In fact, Japan's long-maintained near-zero interest rate is essentially a key valve for the global pool of funds. When this valve tightens, all asset markets will suffer from a lack of liquidity.

A glance at history reveals:

The interest rate hike on March 19, 2024, caused the US stock market and the cryptocurrency bull market to fizzle out immediately.

On July 31 of the same year, Bitcoin plummeted directly from $62,000 to $49,000.

So we must closely watch how the Bank of Japan expresses its stance in December.