Core Viewpoint - The article discusses the paradox between the expectation of interest rate hikes by the Bank of Japan and the prevailing bearish sentiment towards the Japanese yen, highlighting a significant divergence in market behavior despite high probabilities of a rate increase [1][12]. Group 1: Market Sentiment and Positioning - Despite a 91% probability of a rate hike in December, investors are heavily betting on a weaker yen against the dollar, as indicated by positioning data from major institutions like Bank of America and Nomura [1][12]. - The "pain index" for the yen remains in negative territory, reflecting persistent pessimism in the market regarding the yen's short-term outlook [1][12]. - The divergence in sentiment is attributed to liquidity tightening effects and a structural shift in market sentiment, with significant outflows from Bitcoin ETFs and a notable reduction in holdings by long-term Bitcoin holders [12][16]. Group 2: Implications of Yen Depreciation - Further depreciation of the yen could increase Japan's import costs, exacerbating domestic inflation and potentially disrupting economic stimulus plans led by Prime Minister Kishida [3][15]. - The Japanese Finance Minister's attempts to intervene in the currency market have had limited effectiveness, indicating widespread skepticism about the efficacy of such policies [3][15]. Group 3: Bitcoin Market Dynamics - The relationship between yen policies and the Bitcoin market is indirect, primarily through global liquidity adjustments and shifts in market risk appetite [4][15]. - A potential increase in yen financing costs due to rate hikes could lead to a sell-off in Bitcoin as investors close out arbitrage positions, resulting in short-term downward pressure on Bitcoin prices [4][15]. - Historical data shows that after the Bank of Japan exited its negative interest rate policy in 2024, Bitcoin experienced a 12% drop in the same month, followed by a rebound over the next six months, illustrating a "short-term pullback, long-term recovery" pattern [4][15]. Group 4: Long-term Outlook for Bitcoin - If the yen strengthens amid global macro uncertainties, Bitcoin's status as a "super-sovereign asset" may be further reinforced, as evidenced by a decrease in correlation with U.S. stocks post-October 2025 [6][16]. - The potential for Japanese institutional funds to flow into the Bitcoin market is supported by ongoing regulatory improvements in Japan's Web3 sector, including stablecoin legislation and tax reforms [8][16]. Group 5: Future Scenarios - If the Bank of Japan raises rates in December, Bitcoin prices may temporarily drop below $85,000 due to concentrated profit-taking, but could recover to the $100,000 mark if global liquidity conditions improve [9][17]. - Conversely, if the Bank of Japan maintains its current policy, the ongoing yen arbitrage trades may provide short-term liquidity support for Bitcoin, but uncertainty could lead to increased price volatility [10][18]. Group 6: Conclusion - The paradox of rising interest rate expectations and bearish sentiment towards the yen reflects the complexities of global liquidity restructuring [19]. - While Bitcoin may face short-term challenges from yen-related arbitrage, its long-term appeal as a super-sovereign asset and potential inflows from compliant Japanese funds could provide substantial support [19].

Core Insights - The article discusses the precarious situation of Bitcoin amidst the looming threat of a 30% tariff imposed by Trump on the EU and Mexico, highlighting the contrasting sentiments between institutional and retail investors [1][2][6] Group 1: Market Dynamics - Bitcoin experienced a significant price surge, breaking through $122,000, amidst speculation that Trump would back down or the Federal Reserve would intervene [1] - Institutional investors showed strong confidence in Bitcoin, with a net inflow of $1.18 billion in a single day and BlackRock's IBIT fund acquiring $239,000 worth of Bitcoin every minute [2] - Conversely, retail investors are retreating, as evidenced by a 320% increase in Google searches for "Bitcoin bubble" and a decline in small on-chain transactions to historical lows [2] Group 2: Supply and Demand Imbalance - Corporate balance sheets are being transformed by Bitcoin, with MicroStrategy holding over 324,000 Bitcoins valued at $34.5 billion, and Japanese company Metaplanet purchasing 797 Bitcoins in one day [4] - The inventory on exchanges has dropped to a five-year low, with miners holding back on selling, leading to a significant supply-demand imbalance [4] Group 3: Regulatory Developments - The U.S. Congress is reviewing three major bills aimed at increasing transparency and clarifying regulatory responsibilities regarding cryptocurrencies, indicating a shift towards regulatory acceptance [6] - Trump's change in stance from dismissing Bitcoin to advocating for cryptocurrency support within the Republican Party reflects a broader trend towards legitimizing the crypto market [6] Group 4: Market Misjudgments - The market is making four critical misjudgments, including underestimating Trump's resolve, over-relying on Federal Reserve intervention, ignoring liquidity risks during low trading volumes, and underestimating geopolitical risks associated with trade agreements [7][8] Group 5: Bitcoin's Dual Nature - Bitcoin's role as a hedge against monetary risks is being re-evaluated, with its correlation to Nasdaq dropping significantly while showing a negative correlation with the volatility index [10] - The ongoing debate is whether Bitcoin will be seen as "digital gold" or a speculative asset, influenced by macroeconomic factors such as rising U.S. debt interest payments [10] Group 6: Mining Sector Implications - Potential tariffs on mining equipment could reduce mining profits by 10-15%, prompting miners to relocate operations, which could impact Bitcoin's network stability [11] Group 7: Future Scenarios - Three potential scenarios are outlined regarding the tariff situation: a compromise leading to Bitcoin rising to $150,000, partial implementation causing a drop to $112,000, or a full-blown trade war resulting in a 20% Bitcoin crash [12][13]