In the global financial markets, there is a crucial yet often overlooked role played by the Bank of Japan. Its monetary policy may be more critical than the decisions made by the Fed, particularly in its impact on the Crypto Assets market.

The Japanese yen is seen as an important source of global dollar liquidity. Many investors take advantage of the low interest rates on the yen to engage in arbitrage trading, borrowing yen, converting it into dollars, and then investing in high-yield assets such as US stocks, government bonds, or Bitcoin. This operation seems simple, but it actually reflects a deeper logic: as long as the yen maintains low interest rates, global funds can continue this arbitrage model.

However, once the Bank of Japan decides to raise interest rates, this arbitrage mechanism will face severe challenges. Investors may be forced to close their positions, leading to a massive inflow of funds. It's like a swimming pool full of swimmers suddenly having half of its water removed; the entire market will fall into a liquidity crunch.

This situation is not fictional. In March 2024, the Bank of Japan's decision to raise interest rates directly affected the bull market trends in U.S. stocks and the Crypto Assets market. Another policy adjustment at the end of July that year caused the price of Bitcoin to plummet from $62,000 to $49,000, triggering panic in the market.

Therefore, the policy direction of the Bank of Japan in October is worth paying close attention to. While many investors habitually focus on the remarks of Fed Chairman Powell, in fact, the yen policy is the key valve for controlling global liquidity.

For the Crypto Assets market, if the Bank of Japan raises interest rates again in October, it is likely to trigger another round of significant declines. Conversely, if the existing monetary policy is maintained, it may instead become a catalyst for a market rebound.

Overall, while paying attention to the Fed, investors should pay closer attention to the movements of the Bank of Japan, as it may be a key factor influencing global financial markets, especially the trends in Crypto Assets.