The Governor of the Bank of Japan, Kazuo Ueda, recently signaled the possibility of continued rate hikes, which has caused quite a stir in the crypto circle. Last year, interest rates reached a 30-year high of 0.75%, and now further increases are being considered. This is not good news for the global crypto market.

The root of the issue is clear: Japan's long-standing ultra-low interest rate environment has been one of the sources of funds for the crypto market. Investors have been borrowing cheap yen to arbitrage in the crypto and US stock markets, injecting continuous liquidity into the entire ecosystem. Once the rate hike cycle begins, borrowing costs will rise accordingly, and large holders with leveraged positions will be forced to sell assets to repay debts. Historical data shows that each rate hike cycle typically results in Bitcoin dropping by 20%-30%, and this correlation has been repeatedly validated by the market.

In fact, the Bank of Japan is also being forced into a corner. Core inflation has surged to 3%, the prices of essential goods like rice are rising, and the yen continues to depreciate. Relying solely on maintaining low interest rates is no longer sustainable. While raising rates can ease inflationary pressures, it is essentially a liquidity tightening for risk assets. The Federal Reserve has yet to take action, but the BOJ's move to "withdraw liquidity" first will undoubtedly put pressure on the pricing of crypto assets.

However, Ueda also mentioned that decision-making needs to observe economic data, and rate hikes are not set in stone. In the short term, a cautious approach is advisable. Giving up the idea of blindly increasing leverage and securely holding onto Bitcoin and other mainstream cryptocurrencies is the best strategy. After all, macro policies are unpredictable, and the fundamental value of assets remains our true leverage. We hope the Bank of Japan can read the situation carefully and avoid causing severe volatility in the crypto market right at the start of 2026.