The Bank of Japan might really be serious this time.

According to the latest news, they may announce a 25 basis point rate hike on December 19, pushing the interest rate directly to 0.75%—keep in mind, this is a level not seen since 1995. As soon as the news broke, the yen surged against the dollar from around 155 to 154.56.

The volatility in the forex market is just the surface; what truly deserves attention are the potential chain reactions this could trigger behind the scenes.

Many people don’t realize that the low-interest yen has long been an international “funding tool.” Massive amounts of capital are borrowed in yen to chase higher-yielding assets, with cryptocurrencies being one of them. This strategy is known as carry trading in the markets—sounds complicated, but it’s essentially borrowing cheap money to profit from the spread.

But what if the Bank of Japan really starts a rate-hike cycle? Those leveraged positions funded by yen will have to think twice. Once the pressure to close positions builds up, the liquidity that previously helped Bitcoin rebound from its November lows may very likely start to tighten at the margin.

Retail investors, don’t panic.

This isn’t a call to liquidate everything and exit the market—it’s a reminder to adjust your pace. If you have highly leveraged positions, reduce them as much as possible. Keep an eye on US dollar liquidity indicators and watch how volatility transmits across markets. During policy transition periods, the worst thing you can do is stubbornly hold on; flexibility is key.

How to operate specifically? Prioritize assets with reasonable funding rates—don’t chase those hot tokens that have already priced in expectations. Meanwhile, Bitcoin’s performance at key support levels is worth close attention—if the structure holds, there will still be opportunities ahead.

The market is always changing, but there are always opportunities hidden within those changes. Stay rational, adjust your strategy, and that’s how you’ll keep your footing through the cycles.