2025-12-26 14:24:07

Yesterday, Bank of Japan Governor Kazuo Ueda's statement directly exposed the market's "easy money dream": the benign cycle of wages and inflation has already started, the 2% inflation target is within reach, and the negative interest rate policy should come to an end. In other words— the path to rate hikes has been paved, and tightening will continue next year.

The market was stunned. Just a few days ago, there was ambiguity, but on Christmas, they suddenly dropped a policy bomb. Japanese government bond yields soared, and the yen also strengthened. The most uncomfortable are Wall Street hedge funds engaging in yen arbitrage—relying on years of a "free ATM"—who suddenly received a low balance warning.

What is behind this? **A major shift in global liquidity.**

Japan is the last major central bank to cling to ultra-loose monetary policy. Once it turns, it means the world's cheapest funding pool will start to drain. US stocks, emerging markets, cryptocurrencies—all the bubbles inflated by yen arbitrage funds will need to be revalued. Especially Bitcoin—large inflows of low-interest yen in recent years, and once these arbitrage positions are collectively closed, the short-term selling pressure will be intense. Liquidity is what financial markets care about; when the tide goes out, you can see who is swimming naked.

But there is also a silver lining. If Japan truly escapes deflation, in the medium to long term, Asia-Pacific assets could see a valuation reset. Plus, the Federal Reserve recently signaled a "dovish turn" by 2026, and global monetary policy is shifting from "marching in step" to "each major country making its own plans." Capital flows will seek new balance amid this tearing apart—volatility will definitely increase, but opportunities will also expand.

Thirty years of easing are coming to an end. This is not minor patchwork but a major migration of the underlying financial logic.

BTC-0.37%

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BrokenDAO

· 6h ago

Another "Great Power Calculations" situation, in simple terms, is a rewriting of the game rules. The more participants there are, the easier it is for unexpected events to occur. This move by the Bank of Japan actually exposes an old problem—the incentive mechanism for policy coordination is fundamentally misaligned. Whose books are truly considered— the Federal Reserve's or the Bank of Japan's? Who will really consider the overall balance? The moment when collective liquidation of arbitrage positions occurs is when it's time to see if their risk control design is sophisticated enough. Most likely, it will once again prove that: human weakness > any risk model.

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EyeOfTheTokenStorm

· 6h ago

Another signal of liquidity withdrawal. According to my quantitative model, the unwinding of yen arbitrage positions will cause a clear technical breakdown. BTC faces significant short-term resistance. Wait, is it really that simple? Historical data shows that central bank shifts often occur through repeated market adjustments, not in one step — this might actually be an opportunity to get on board. Japan has been out of deflation for 30 years. Where will the funds go? The Asia-Pacific region is indeed worth allocating to, but only if we can first survive this round of shakeout. Honestly, next year's major powers each playing their own game will be truly complex. Increased volatility means more room for trading gains, but the key is to control risk exposure. The old cliché that the tide is going out and people are swimming naked is overused, but this time it’s truly different — the world's cheapest money might really be gone.

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HodlVeteran

· 6h ago

The group involved in Yen arbitrage really stepped into a trap this time. I was cut in 2018 exactly like this. Now watching their liquidation feels like watching my own replay [laugh cry]. When the tide goes out, those swimming naked have to admit defeat. Veteran traders advise: don’t try to bottom fish when the selling pressure comes, wait until things stabilize before entering the market. Thirty years of easing policy suddenly ended, and we retail investors are naturally the ones hard to cut, destined to be taken out. For those going all-in, buckle up and stay safe. With liquidity shifting dramatically, I smell the same vibe as 2018. Newcomers, don’t follow the trend—holding coins through winter is the real strategy. Honestly, Bitcoin might drop more sharply than expected this round. I personally suffered heavy losses because I didn’t get out in time back then. The Bank of Japan has finally turned around, and the entire game has changed. The retail investors will have to pay their tuition again. A bear market warning is here, brothers. Don’t always think about switching lanes for a quick overtake. That’s how I’ve been stepping into traps for years.

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