In mid-December, Asian traders opening their trading terminals were caught off guard by intense volatility in the crypto market. Bitcoin suddenly plummeted from the $90,000 level to $85,616 without any warning, with a single-day decline of over 5%. The chain reaction triggered by this drop was significant—billions of dollars in market value evaporated within just a few hours.

Interestingly, other global financial assets performed relatively stably. Traditional safe-haven assets like gold only dipped by $1, almost negligible. In the absence of obvious negative news and with on-chain data not indicating large-scale selling pressure, the true drivers behind this market movement began to surface—pointing to the upcoming announcement of the Bank of Japan's interest rate decision on December 19.

The market widely expects Japan to reach its highest interest rate level in 30 years. While this expectation seems moderate, the signals it sends are enough to shake the global financial landscape. As the yen's appreciation prospects become clearer, a large amount of cross-border arbitrage capital begins to reallocate, making the cryptocurrency market one of the first to come under pressure.

Returning to the Bank of Japan itself. Over the past decade, ultra-loose monetary policies have permeated every corner of the global financial system. Since the 2008 financial crisis, the Bank of Japan has continuously expanded its easing measures, and by 2016, it was the first major economy to introduce negative interest rates, maintaining the longest period of negative rates among major economies. What has this extreme easing environment produced? A large outflow of cheap yen.

This cheap capital has been flowing everywhere, seeking high-yield investment opportunities through cross-border arbitrage. Emerging market stocks, bonds, and even new assets including cryptocurrencies have become targets for yen arbitrage funds competing for returns. It can be said that this massive yen arbitrage capital once served as a key driver of crypto market growth. Now, with policy shifts, the reflow of these funds naturally becomes an important trigger for market adjustments.