This round of Bitcoin big dump has a seriously underestimated driving force behind it - the yen interest rate hike.

The data is here: the probability of the Bank of Japan raising interest rates is as high as 97%, the first time in 30 years. The historical pattern is harsh; when Japan raises interest rates, Bitcoin often falls by 20-30%. It seems like a coincidence, but in fact, it is the underlying arbitrage logic of the global cryptocurrency market at work.

For the past thirty years, Japan has implemented low interest rates and even negative interest rates, making the yen the cheapest "borrowing tool" in the global financial market. How does it work? Investors borrow yen from Japanese banks, convert it into US dollars, and then dive into Bitcoin and other risky assets. The scale of this money is not small—rough estimates suggest that at least 15%-20% of the funds in the global cryptocurrency market come from this operation. This liquidity has quietly supported the price of Bitcoin.

Now the Bank of Japan has started to raise interest rates, and the rules of the game have completely changed.

First, the rise in yen interest rates has caused arbitrage costs to soar, obliterating the previous profit margins. Second, the pressure on the yen to appreciate has increased, forcing investors to sell Bitcoin to cover their yen debts in order to avoid currency losses—this is known as "passive liquidation wave," and the impact of the sell-off is understandable.

What’s even more heartbreaking is that in 2026, the Bank of Japan may continue to raise interest rates while planning to offload $550 billion in ETF assets. This combination of moves will further drain global liquidity, and risk assets like Bitcoin can only continue to be suppressed.

For people in the crypto world, the interest rate hike in yen is not a short-term flash crash, but a long-term trend change. This force will continue to be released in the upcoming trades.