Tokyo's policymakers are dismantling a years-long arbitrage game. The Bank of Japan announced a 25 basis point interest rate hike, raising the policy rate to 0.75%—the highest since 1995. Meanwhile, across the Atlantic in Washington, a power transition drama is unfolding for the Federal Reserve Chair, with unprecedented divergence in market expectations regarding the interest rate path.

This is a crossroads moment for the cryptocurrency market. The traditional Christmas season rebound strength is colliding fiercely with the waves of year-end institutional rebalancing and tax-loss selling.

Speaking from history: Over the past seven Christmas-New Year cycles, the probability of Bitcoin rising is about 57%. However, the volatility behind this number is frighteningly large— the increase at the end of 2020 was 46.15%, but by the end of 2021, Bitcoin actually fell by more than 10%. A comparison of these two years is enough to show how elusive this season can be.

Traders are now reminiscing about the miracle of the surge in 2020 while also harboring concerns about the heavy decline compared to the same period last year. The global financial markets have entered the traditional "Christmas market" time window, and trading enthusiasm is beginning to cool down. However, for the crypto market, this period is often not a certain opportunity, but rather resembles a blind box full of uncertainties.

The basis for yen arbitrage is loosening, the direction of the Federal Reserve's policy is still unclear, and the capital allocation of institutions has also peaked at the end of the year—what kind of collision these three forces will bring in the Christmas week is anyone's guess.