Lately, the market has been keeping a close eye on the Bank of Japan—rate hike expectations are rising again. So what does this have to do with the crypto world?

First, some background. Japan has maintained ultra-low interest rates for a long time, which has given many institutions an arbitrage opportunity: borrow cheap yen and use it to buy US Treasuries to profit from the interest rate spread. This move is highly profitable—low cost, steady returns.

But now there’s a problem. If Japan really raises rates, borrowing costs will shoot up, and the profit margin for carry trades gets squeezed or even disappears. So what will those institutions do? They’ll sell off US Treasuries to get their money back. If there’s a massive sell-off of Treasuries, prices drop, yields rise, and risk assets take a hit—crypto won’t be able to escape that shock.

That said, the impact of a Japanese rate hike is actually quite indirect, with most of the blow focused on Japan’s domestic financial markets. What really drives crypto trends is still the Federal Reserve. And what the Fed does depends on how US economic data performs.

So in the next few days, keep a close watch on these times:

Tonight at 23:00, Fed Governor Bowman speaks;
Tomorrow at 21:15, US November ADP employment numbers are released;
Thursday at 21:30, initial jobless claims for the week ending November 29 in the US will be announced;
Friday at 23:00, three major data releases: US PCE Price Index annual rate, preliminary December one-year inflation expectations, and preliminary December University of Michigan Consumer Sentiment Index.

These are the real indicators that will set the tone for market sentiment.