Yesterday at 3 a.m., after a rate hike decision was announced in Tokyo, my phone wouldn't stop buzzing—lots of people asking me "Arbitrage funds are pulling out en masse, should I run away?" My first reaction wasn't to check the market, but to take out my wallet and see if the USDD price was fluctuating. Turns out, it was completely steady, still firmly at 1 dollar.

Does this wave of "global capital flight" caused by rate hikes really have to keep us awake at night? Not necessarily.

The market's panic logic is actually quite straightforward. The Bank of Japan announced a fourth rate hike, raising interest rates from 0.5% directly to 0.75%; they also plan to sell ETFs worth 82 trillion yen, a process that will continue for 112 years. Simply put, Japan has officially bid farewell to its 16-year era of negative interest rates.

How was it done before? Capital borrowed at Japan's ultra-low interest rates, converted into dollars or other currencies, then invested in high-yield assets like US stocks and cryptocurrencies. Now that Japan has raised rates, the cost of arbitrage has increased, and the market fears funds will flow back to Japan, triggering a sharp decline.

But a careful calculation shows there's no need to be so anxious.

First, the interest rate differential is still a big lure. The yen is now at 0.75%, and the dollar at 3.75%, with a gap of over 3 percentage points. Would big capital really give up this free profit? Moreover, in the crypto world, staking yields for stablecoins generally range from 5% to 6% or higher, so a quick reflow isn't that easy.

Second, those who need to run already did so. This isn't the first rate hike. Since the historic turning point in March 2024—jumping from -0.1% directly to 0.1%—and the subsequent rate hike in July, risk assets have already gone through several rounds of reshuffling. True arbitrage big players wouldn't wait until now to react.

The performance of USDDVMO is right in front of us. In this most uncertain moment, it still maintains a stable 1-dollar peg, indicating that market confidence in this high-quality stablecoin hasn't wavered. This is the most telling evidence.