Global central banks are playing out a seemingly contradictory storyline. On one hand, the Bank of Japan raised its policy interest rate to 0.75% in December 2025, reaching a 30-year high. Governor Ueda Kazuo sent a clear signal— as long as the economic and price conditions continue to improve, the pace of rate hikes will not stop.

On the other hand, although the Federal Reserve has already cut interest rates three times in 2025, the December dot plot shows a much more cautious stance toward 2026. Market expectations may only include one rate cut, and this divergence in pace leaves investors feeling uncertain.

This "Nippon-style easing" situation may seem like routine policy differences, but in reality, it is shaking the foundation of global liquidity. Especially the massive yen carry trade system—market estimates suggest the total size of this trade could be between $19 trillion and $30 trillion.

Here's a simple explanation of this mechanism: Global institutional investors have relied on Japan’s near-zero-cost financing environment in the past, borrowing yen and then converting it into dollars to buy US stocks, US bonds, or even high-risk, high-reward assets like Bitcoin and Ethereum. This logic thrived in times of abundant liquidity.

But now, the situation has reversed. Japan’s rate hikes mean the cost of borrowing yen has risen significantly, while the Fed’s insufficient rate cuts have lowered the expected returns on dollar assets. With both ends squeezed, arbitrage opportunities have greatly diminished, making positions less profitable. The inevitable result is that these institutions are considering closing positions and withdrawing, reallocating funds back.

What does this mean for the crypto market? The 2026 trend is unlikely to continue the simple logic of "massive liquidity flooding and everything rising." The tide of liquidity is receding, leaving us to ask: are the remaining assets truly supported by fundamentals, or are we in a bubble-filled environment? The test is coming.

In the coming months, pay attention to several key signals: first, whether the yen’s appreciation trend can continue—this directly affects the cost structure of carry trades; second, the Fed’s true stance on inflation—if data worsens, rate cut expectations may be forced higher, but that would re-expose inflation risks; finally, whether the crypto market can find an independent support logic rather than relying entirely on traditional financial liquidity fluctuations.

Overall, 2026 will be a market of divergence. Those who are prepared will find opportunities, while those who haven't thought it through may easily get caught in pitfalls.