The triple dilemma of cryptocurrency asset adjustment: Yen policy shift, Fed path ambiguity, and on-chain token unbundling

The current downturn in the crypto market is not driven by a single factor but is the result of a triple overlay: a dramatic shift in the macro liquidity environment, divergence in central bank policies, and on-chain capital transfers. As of the latest data, Bitcoin fluctuates around $93.03K, with a 24-hour decline of -2.23%; Ethereum is under pressure at $3.22K, with a broader decline of -3.25%. This not only reflects in individual cryptocurrencies but also impacts a wide range of assets within the crypto ecosystem and related concept stocks.

Bank of Japan Rate Hike: An Overlooked Market Turning Point

Among various analytical perspectives, the policy shift of the Bank of Japan (BOJ) is often underestimated by the market, yet its actual influence exceeds expectations.

Historical data provides strong evidence. The three previous BOJ rate hikes show that Bitcoin holders faced consistent downward pressure. Specifically, after the March 2024 yen rate hike, Bitcoin dropped about 27% over the following 4-6 weeks; after another hike in July 2024, the decline expanded to 30%; entering January 2025, Bitcoin again experienced a 30% correction following a rate increase. This regular pattern of decline reflects the profound impact of yen interest rate changes on global risk asset allocations.

Market expectations for this rate hike are already largely confirmed. Probabilistic models predict a 97% chance of a 25 basis point increase in the yen rate, indicating that the announcement is merely procedural confirmation, with the market having already priced in this expectation. More notably, this hike could push Japan’s interest rates to nearly a 30-year high, signaling a clear shift in policy stance.

Why does the BOJ’s policy change have such a profound impact on the global crypto market? The core reason lies in Japan’s unique position within the global financial system. As the largest overseas holder of U.S. Treasuries (over $1.1 trillion), any policy adjustment by the BOJ can reshape the global dollar supply structure, push up U.S. Treasury yields, and consequently affect the relative attractiveness of risk assets like Bitcoin.

A deeper transmission mechanism involves the long-standing phenomenon of “yen arbitrage trading.” For years, global investors have exploited Japan’s low-interest-rate environment by borrowing yen at low cost and investing in high-yield assets, including U.S. stocks, bonds, and cryptocurrencies. This arbitrage has been a key driver of global capital flows. However, when the BOJ begins raising interest rates, this balance is disrupted—costs of borrowing yen rise sharply, forcing investors to unwind these high-risk positions, triggering a deleveraging across markets.

The current macro backdrop further amplifies this risk. Amid a global environment where most major central banks remain in easing cycles, Japan’s independent tightening stands out. This “asynchronous” policy stance directly triggers reverse unwinding of arbitrage trades, causing turbulence in the crypto market once again.

However, the real key risk may not be the rate hike itself but the BOJ’s guidance on policy direction beyond 2026. According to publicly available plans, the BOJ will begin large-scale ETF asset sales starting January 2026, amounting to approximately $550 billion. If this move is accompanied by further or multiple rate hikes, markets will face a “rate hike + accelerated balance sheet reduction” dual tightening pressure, which would accelerate yen repatriation, potentially triggering a sell-off in risk assets and sustained impacts on equities and cryptocurrencies.

Conversely, if the BOJ chooses to pause further tightening in subsequent meetings after this rate hike, the market could see the end of the adjustment phase and enter a rebound cycle.

The Uncertain Path of Fed Rate Cuts

The BOJ’s rate hike is merely a trigger; the ongoing uncertainty surrounding the Federal Reserve’s policy remains the primary source of downward pressure.

After the initial rate cut cycle, market focus has quickly shifted to the core question: “How many more rate cuts can the Fed implement in 2026?” Unfortunately, the Fed has yet to provide clear forward guidance, and this uncertainty is fueling pessimism about future liquidity.

Two upcoming economic data releases this week will be critical in re-pricing these expectations. First is the non-farm payroll report, scheduled for release at 21:30 (UTC+8). The market broadly expects a significant slowdown in new jobs to +55K, down from +110K in the previous period—a decline of over 50% month-over-month.

On the surface, this employment weakness seems favorable for rate cuts—a classic “weak employment = Fed easing acceleration” logic. But the market’s real concern is another possibility: if the data shows a “cliff-like” rapid deterioration or reveals structural labor market issues, the Fed might adopt a wait-and-see stance, delaying further policy adjustments and breaking the market’s easing expectations.

CPI data presents another layer of risk. Scheduled for release on December 18 (UTC+8), market attention has shifted to whether inflation will rebound or show stickiness. If the data disappoints, the Fed might maintain its official easing stance but could accelerate balance sheet reduction to offset this pressure, creating a “nominal easing, actual tightening” monetary policy stance.

Looking ahead, the next truly certain rate cut window is pushed to January 2026. Probabilistic models suggest a 78% chance of holding rates steady on January 28, with only a 22% chance of a cut. This high level of uncertainty is eroding investor confidence in future liquidity conditions.

Divergence in global central bank policies further exacerbates this situation. This week, the Bank of England and the European Central Bank will also hold meetings, but with Japan having already shifted to tightening, the Fed’s ambiguous stance, and Europe and the UK still in a wait-and-see mode, the global monetary policy landscape is highly fragmented, making it difficult to form a unified direction. For crypto markets, this “disjointed liquidity environment” is often more damaging than clear tightening policies, as it creates additional uncertainty premiums.

Multi-layered On-Chain Capital Transfers

Beyond macro policies, on-chain data reflecting capital shifts are amplifying market downside.

Institutional selling is at the forefront. Spot ETF products have seen significant outflows this week. Specifically, Bitcoin spot ETFs experienced a daily net outflow of about $350 million (roughly 4,000 BTC); Ethereum ETFs have cumulatively net outflows of about $65 million (roughly 21,000 ETH). This increasing outflow indicates a clear decline in institutional investor confidence in the short term.

Interestingly, Bitcoin’s performance during U.S. trading hours has been relatively weaker. According to some research firms, since the launch of a major U.S.-listed crypto-related ETF, holding positions after U.S. market close has yielded a cumulative return of 222%, whereas holding only during trading hours has resulted in losses exceeding 40%. This stark time-of-day difference suggests that institutional selling pressure is more intense during U.S. market hours.

On-chain signals are even more explicit. On December 15 (UTC+8), Bitcoin exchange net inflows reached 3,764 BTC (about $340 million), hitting a phased high. This figure implies large holders are consolidating deposits into exchanges, indicating that long-term holders or institutions are preparing for a potential large-scale sell-off.

Market maker behavior also provides important signals. For example, some well-known market makers transferred over $1.5 billion worth of assets to trading platforms from late November to early December. Although some reverse operations occurred in subsequent weeks, such large capital flows alone can generate panic sentiment.

Of particular concern are the movements of miners and long-term holders (OGs). On-chain monitoring shows signs of hash rate rotation, a phenomenon historically associated with miner stress periods and liquidity tightening. Data indicates that long-term holders who have not moved their coins in the past six months have begun to sell Bitcoin continuously, with a marked acceleration from late November to mid-December.

Hash rate data further confirms miners’ difficulties. As of December 15 (UTC+8), Bitcoin’s total network hash rate was approximately 988.49 EH/s, down 17.25% from the same time last week—a rare short-term decline. Industry rumors suggest some mining farms in Xinjiang are shutting down. Based on estimates, with an average of 250T per miner, at least 400,000 Bitcoin miners have recently ceased operations.

Summary: Triple Impact of Liquidity Environment

The current adjustment in crypto assets fundamentally stems from a sharp change in the liquidity environment. The BOJ’s policy shift has triggered years of accumulated yen arbitrage positions; the subsequent uncertainty about the Fed’s policy has dampened expectations for global liquidity replenishment; and on-chain capital transfers have further amplified this downward pressure.

The overlay of these three factors has caused significant corrections in assets like Bitcoin and Ethereum. In the short term, whether the market can weather this difficult period ultimately depends on whether U.S. economic data can guide the Fed to adjust its policy path and whether the BOJ will signal easing in upcoming meetings.