The interest rate hike decision in Tokyo that night has created a huge pit in the global financial markets. The Bank of Japan has raised interest rates substantively for the first time in thirty years. On the surface, it seems to be just a domestic policy adjustment, but the chain reaction behind it is devouring global risk assets.

The most terrifying thing is the huge ghost hidden behind this - trillions of dollars of cheap yen. Over the years, hedge funds and large institutions have been playing a game: borrowing yen at nearly zero cost and then pouring the money into U.S. stocks and the cryptocurrency market, taking advantage of high-yield corners around the globe. BTC, ETH, and various altcoins have all become their tools for arbitrage.

Now the Bank of Japan has tightened its policies, and the cost of borrowing yen has skyrocketed. The question arises – the money borrowed in yen has to be repaid, and it has to be done quickly. Thus, an epic reverse carry trade has begun. Institutions are forced to sell off their assets, from BTC to ETH and various other cryptocurrencies, just to exchange them back for yen to pay off debts. Liquidity has been completely drained like this.

History has a painful lesson: since Japan's monetary policy shifted to tightening, Bitcoin has plunged more than 20% with every market fluctuation. Now, coinciding with the Christmas holiday, the market is already lacking participants, and liquidity is weak. Even a slight selling pressure at this time can be magnified infinitely, triggering a chain reaction of leveraged liquidations. The shadow of liquidation is looming over every open position.

But interestingly, while everyone is focused on the shockwaves of Central Bank policies, the internal technological innovation forces within the crypto market are brewing new changes.