This week, the pulse of the global financial market is tightly gripped by three major events: a strong U.S. non-farm payroll report, the upcoming U.S. CPI inflation data, and the almost certain historic interest rate hike by the Bank of Japan.
These three events point to a core proposition — the tide of global liquidity is rapidly receding. As one of the most liquidity-sensitive assets, Bitcoin ("digital gold") is falling from its pedestal, exposing its true nature as a high-beta risk asset, hanging by a thread.
1. Stronger-than-expected Non-farm Payroll Sets Tightening Tone
Tonight, the market will receive an extremely special and delayed report. The U.S. September non-farm payroll data, originally scheduled for release in early October, has been postponed to today due to a 48-day government shutdown. This report acts like a "rearview mirror," reflecting the market conditions from over a month ago (September).
The main highlights and potential impacts are:
● The strength of the data itself: The market generally expects an increase of 54,000 jobs in September, which, while higher than August's 22,000, is still seen by economists as a sign of a "weak" labor market. However, Goldman Sachs has given a more optimistic forecast of 80,000. The significance of this contradictory data lies in filling the "data vacuum" of the past two months, providing the market with an official reference anchor.
● Significant revisions to historical data: Tonight's report will include revisions to the July and August data. Some market analysts point out that the annual benchmark revision could be as high as 800,000. If the previously strong employment momentum is significantly revised down, it could drastically alter market expectations for Federal Reserve policy, even opening up the possibility for more aggressive rate cuts.
● Limited impact on Federal Reserve policy: Due to its severe lag, the industry generally believes this report will have limited help for the Federal Reserve in assessing the current complex economic situation. Fed Chair Powell has likened the current decision-making environment to "driving in thick fog." Therefore, the market may not overreact unless the data presents a significant surprise.
2. CPI Inflation and Japan's "Historic Rate Hike"
The non-farm payroll is just the warm-up; the real eye of the storm lies in the two major events that follow.
First is the U.S. CPI inflation data.
● The November CPI, delayed due to the government shutdown, will be revealed this Thursday. The market generally expects a month-on-month increase of 0.3%, with the annual rate remaining at 3%.
● However, the risk lies in the actual reading having an upward risk due to the long-term lack of data, potentially reaching 3.1%.
● The current stubbornness of inflation mainly comes from the service sector. If the data exceeds expectations, it will further reinforce the Fed's hawkish stance, further suppressing rate cut expectations and tightening the financial environment.
Next is the Bank of Japan's interest rate decision.
● The market almost unanimously expects (with a probability of about 94%) that the Bank of Japan will announce a 25 basis point rate hike on December 19, raising the policy rate from 0.50% to 0.75%.
● This rate hike is significant, bringing the cumulative rate hike for the entire year of 2025 to about 0.5%, marking the largest annual rate hike by the Bank of Japan in 35 years, signaling a fundamental shift from decades of ultra-loose monetary policy.
3. The "Deleveraging" Ghost of Yen Arbitrage Trading
The impact of Japan's rate hike extends far beyond its borders, as it will directly hit the "capillaries" of the global financial system — yen arbitrage trading.
This is a popular strategy that has persisted for decades: investors borrow yen at extremely low rates, convert it into dollars or other high-yield currencies, and then invest in U.S. Treasuries, U.S. stocks, or even cryptocurrencies. This trading provides a continuous flow of yen liquidity to the global market.
However, the Bank of Japan's rate hike will kill this logic in two ways:
Increased cost of funds: The interest rate for borrowing yen will rise directly.
Triggering appreciation expectations: Rate hikes typically boost the appreciation of the local currency, exposing traders to exchange rate loss risks.
This will force global investors to "delever" — that is, sell off assets like U.S. stocks, U.S. Treasuries, and Bitcoin to convert back to yen to repay loans. This chain reaction of selling represents the most direct and deadly macro risk facing Bitcoin. Historical data cruelly confirms this: in March, July 2024, and January 2025, following the Bank of Japan's previous rate hikes, Bitcoin experienced declines of over 20%.
Notably, CICC analysis points out that since this rate hike has been fully priced in by the market, and the current narrow arbitrage trading scale is below the peak in 2024, the probability of a systemic shock triggered solely by the rate hike is relatively low. The real danger lies in the potential for a combination of the rate hike with unexpected macro risk events (such as a CPI spike), which could trigger a resonance of sentiment and algorithmic trading, amplifying the sell-off.
4. "High Beta" Assets in the Tide of Liquidity Retreat
In such a grand narrative of liquidity, Bitcoin's own narrative (such as halving, ETF) has temporarily lost its effectiveness. Its price behavior is clearly revealing its essential attributes.
Cognitive disillusionment from "safe haven asset" to "risk asset": In the past, Bitcoin was often likened to "digital gold." However, during this tightening cycle, its movements have been highly correlated with Nasdaq tech stocks, showing extreme sensitivity to global liquidity, becoming a pure high beta risk asset. In an environment of high real interest rates, the appeal of zero-yield Bitcoin systematically declines.
Weak technicals and emotional collapse: Bitcoin's price has significantly retreated from its 2025 highs, struggling below key support levels. Market sentiment indicators are deeply entrenched in the "extreme fear" zone. Previously, when the price fell below $86,000, nearly $600 million in liquidations occurred across the network within 24 hours, most of which were long positions, indicating that leveraged speculative positions have been severely wiped out, leaving the market structure extremely fragile.
Collective failure of institutional predictions: At the beginning of 2025, mainstream institutions widely predicted that Bitcoin would rise to $150,000 or even $200,000 by the end of the year, with the foundational logic being the influx of ETF funds and Fed rate cuts. Now, these predictions have severely deviated from reality. This precisely proves that analyzing Bitcoin outside the framework of global macro liquidity is a fatal error.
5. Scenario Simulation and Survival Guide
In the remaining time this week, the market will finalize pricing based on the actual results of the CPI and the Bank of Japan, with Bitcoin facing several paths:
● Scenario 1: Mild CPI + Bank of Japan "dovish rate hike" (best but low probability): If inflation does not exceed expectations, and the Bank of Japan raises rates but signals caution for the future, the market may interpret this as "bad news fully priced in." Bitcoin may technically rebound based on current support levels (such as the $86,000-$88,000 range). However, this would only be a continuation of the decline, not a reversal.
● Scenario 2: Strong CPI + Bank of Japan raises rates as expected (high probability): This is the most dangerous combination. Stubborn inflation in the U.S. and Japan's initiation of tightening will create a "resonance draining" effect. Bitcoin will easily enter a new round of decline, and if key support levels are breached, it could drop to $78,000 or even lower.
● Scenario 3: Black Swan event triggers systemic risk aversion: If a macro shock leads to a crash in traditional risk assets like U.S. stocks, Bitcoin will completely lose its independence and experience a liquidity crisis-style crash alongside the market.
For investors, the wisest strategy before the Bank of Japan's decision on Friday is "cash is king, defense is paramount." The true market bottom requires waiting for the panic of global liquidity tightening to be fully priced in. Bitcoin's next spring will inevitably begin with the Fed clearly shifting to easing and the complete clearing of global arbitrage trading. Until then, any attempts to swim against the tide may be swallowed by the retreating waves.
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