On December 11th, a noteworthy signal emerged from the Japanese bond market. The bid-to-cover ratio for the 20-year government bond auction reached 4.1, hitting the highest level since 2020 and significantly surpassing the previous 3.28. Behind this number, subtle changes are taking place in the traditional financial markets.

Following the auction results, Japanese bond futures rose accordingly. On the surface, this appears to be a fluctuation within traditional finance, but for the crypto market, the underlying logical chain cannot be ignored.

The market's expectations for a rate hike by the Bank of Japan continue to heat up. Yields on government bonds across various maturities are approaching multi-year highs, with the 20-year yield nearing its peak since 1999. It is important to note that the Bank of Japan has long been known for its accommodative policies. Once the policy shifts, global capital allocation will inevitably face restructuring.

The crypto market is highly sensitive to liquidity. When risk-free yields rise, some funds naturally flow into assets with higher certainty. This reallocation process often puts pressure on high-volatility assets.

More intriguing is the Japanese government's fiscal operations. Prime Minister Sanae Takaichi just announced the largest supplementary expenditure plan since the pandemic, aiming to boost the economy through fiscal stimulus. Meanwhile, the government is also increasing short-term bond issuance to balance the books. This "spending one hand and borrowing with the other" strategy essentially tests the market's debt-bearing capacity. For us, this means that volatility in Japanese yen liquidity may intensify, potentially impacting crypto trading pairs denominated in yen.