The Bank of Japan on December 19th pressed the rate hike button, raising the benchmark interest rate from 0.5% to 0.75%, creating a 30-year high. The decision was unanimously approved, with market expectations extremely high (94% coverage), which seemed like a bearish signal — but the reality was quite the opposite, as the crypto market instead began to warm up.

Let's first look at the details of the policy. Although the central bank raised rates, their tone was noticeably moderate. The statement emphasized "gradual progress," with a plan for 1-2 rate hikes in 2026, each by 25 basis points, with an ultimate target range perhaps between 1% and 1.5%. This is not aggressive monetary tightening but a controlled, gradual normalization process. The underlying logic is also understandable: Japan's inflation has exceeded 2% for 43 consecutive months, the yen has been depreciating long-term, and the central bank indeed needs to do something. But at the same time, Japan's debt scale is huge, and the economy is still in the early stages of recovery, so a rapid rate hike could backfire.

So why didn't the crypto market collapse but instead heat up? The key is that the "uncertainty" surrounding this rate hike had already been fully digested. The market had already adjusted continuously before the hike, and when the news was officially announced, the mental burden was finally lifted. Funds that had been trapped in panic-driven selling began to flow in, shifting sentiment from a flight-to-safety panic to buying on dips.

More importantly, there is the "temperature difference" effect of global liquidity. The Federal Reserve has already started a rate-cutting cycle, with expectations of further easing in January next year rising. The Fed's easing policy has, to some extent, offset Japan's tightening. In other words, the overall global liquidity environment is not tightening significantly; instead, the attractiveness of risk assets is rebounding.

Let's not forget the carry trade variable. The roughly 4-5 trillion USD in yen financing carry trades do face some liquidation pressure, but because this rate hike was widely anticipated, the impact was structural rather than systemic, and no overwhelming selling pressure formed.

In summary, this rate hike is actually the "landing" that the market wanted to see — policy action with a manageable pace, a global liquidity landscape that has not worsened but improved, and as a risk appetite proxy, cryptocurrencies naturally rebounded accordingly.