Why did the market suddenly change recently? It all starts with that statement from the Bank of Japan.

Let’s review what happened over the past few days: On December 2, the Federal Reserve unexpectedly announced a halt to quantitative tightening. That should have been good news, right? But the next day, neither US stocks nor BTC saw much of a rise. Going back one more day, on December 1, Bank of Japan Governor Kazuo Ueda dropped a bombshell—the market’s expectation for a rate hike in Japan in December soared to 76%, and Japanese government bond yields hit a new high. Further back, on November 29, regulators in our region took action again, clearly defining virtual currency business operations.

These three events may seem unrelated, but they’re all connected at a fundamental level. The core issue is the breakdown of the yen carry trade. What have many institutions been doing in recent years? Borrowing ultra-low-interest yen, then turning around to buy US stocks and crypto, profiting from both the interest rate differential and asset appreciation. Now that Japan is about to raise rates, that strategy no longer works. What’s worse, this could trigger a chain reaction: asset prices fall → forced liquidation to repay yen loans → yen becomes more expensive → even more assets are sold off. This is the so-called death spiral.

The current situation is quite contradictory: the US is starting to inject liquidity, while Japan is tightening—one is stepping on the gas, the other on the brakes. For regular investors, short-term volatility will definitely increase, but a liquidity inflection point may truly be approaching. The key is to watch which of these two forces ultimately prevails, and whether regulators will continue to step up their actions.