Everyone is focused on the Federal Reserve and inflation data, but they overlook a more recent hot topic—the Bank of Japan's interest rate decision on December 18-19.

This may sound distant, but it hits hard. Just look at recent records:

In July 2024, the rate hike caused Bitcoin to plunge 26%
In January 2025, another hike led to a 25% drop

Why are rate hikes so deadly? Arbitrage trading is the key. Many investors borrow in yen to buy risk assets—stocks, cryptocurrencies, U.S. Treasuries—profiting from interest rate differentials. Once Japanese interest rates rise, borrowing costs soar, forcing these investors to quickly unwind positions and repay debts, causing their assets to flood into the market. Stocks and cryptocurrencies both follow suit and decline.

Looking ahead, the Bank of Japan is actually quite constrained. The economy is shrinking, and the government has just announced a 17 trillion yen stimulus package to stabilize the market. Who would dare to pursue long-term tightening? Impossible.

So the pattern is clear: in the short term, there will inevitably be a wave of declines, shaking out weak hands. But such sharp drops often signal a bottom. Once the selling wave passes, the market will gradually restore its fundamentals. Moreover, major global economies are moving toward easing monetary policies, and the European Central Bank and Federal Reserve will need to follow suit. This paves a relatively friendly path toward 2026.

Now is the pain point; the opportunity to pick up bargains will come later.