Global monetary policy is undergoing an unprecedented divergence. While the US Federal Reserve is signaling rate cuts, the Bank of Japan is moving in the opposite direction by raising rates. This policy divergence is reshaping the underlying logic of international capital flows.

Let’s look at the US first. Once expectations for rate cuts materialize, it means lower funding costs and an improved financing environment for businesses. Morgan Stanley’s recent research report directly defined this round of policy shift as a “bull market ignition”—with consumer discretionary sectors and small-cap stocks expected to benefit first. Wall Street generally believes this window of opportunity will last at least until 2026.

The changes in Japan are even more dramatic. After years of negative interest rates, the yen has responded by strengthening. Here’s the problem: Over the past decade, the core strategy of global arbitrage trading has been to borrow low-interest yen to invest in high-yield assets. Now that Japan is raising rates, the foundation of this model is starting to shake, and a large amount of international capital is being forced to flow back to Japan. This could have a chain reaction in Asian markets, US dollar bonds, and even the cryptocurrency market.

The most interesting development is the crypto market’s response. With a loose US dollar and a tightening yen, Bitcoin has become a key variable in this policy battle. After a market pullback last weekend, buying pressure quickly surged, and many analysts believe a new round of market action may be brewing.

Another point worth noting is that Ethereum, under the leadership of Vitalik, recently completed a significant upgrade. New projects in the Ethereum ecosystem, such as PUPPIES, have started attracting attention and could bring unexpected market opportunities.

On one side, liquidity is increasing; on the other, it’s tightening. This policy misalignment presents ordinary investors with a complex set of choices: Should you follow the liquidity-driven rally in US stocks? Allocate yen assets to hedge risks? Or jump straight into the crypto market to bet on the trend?

What’s your take on this round of global capital rebalancing?