The market is always using volatility to shake out the greedy and the fearful. Today’s V-shaped rebound is the best proof.

At noon, the Bank of Japan finally delivered the expected move — raising interest rates by 25 basis points to 0.75%, a 30-year high. But what’s interesting is that the market didn’t panic; instead, it seemed to breathe a sigh of relief, resulting in a beautiful V-shaped turnaround.

In the morning, Bitcoin briefly dropped to $84,418, and Ethereum was even more aggressive, plunging directly to $2,773. Once the news was confirmed, buy orders flooded in like a tide, and Ethereum rebounded sharply to $2,983, just shy of breaking the $3,000 mark.

**Why is a rate hike actually a positive?**

Conventionally, a central bank rate hike is seen as tightening liquidity, which should be bearish for cryptocurrencies. But today’s situation is completely reversed. Think about it carefully — what the market truly fears isn’t the bad news itself, but the uncertainty it brings. The traders had already anticipated this rate hike by the Bank of Japan, and the expectations had been digested beforehand. When the decision was finally announced, it actually released the built-up insecurity — this is a classic example of “bad news fully priced in, turning into good news.”

Take August 2024 as an example. At that time, the Bank of Japan unexpectedly shifted its stance, causing the Nikkei to plunge by 12.4%, and Bitcoin also suffered, dropping over 16%. But this time is completely different; all the moves were within expectations, and the market sentiment stabilized, avoiding panic selling.

The most direct impact on the crypto market actually comes from the unwinding of carry trades. With low yen interest rates, global funds borrow yen to exchange for dollars and euros, then invest in higher-yield assets. When Japan starts raising rates, this financial leverage has to unwind, and carry positions are closed out. This can lead to capital flowing back into cryptocurrencies, pushing their prices higher.