The crypto market’s tumultuous ride presses on as we find ourselves in the heat of Friday morning, with Bitcoin’s price movements once again capturing headlines. Bitcoin surged from a 1:00 a.m. UTC low of $85,200 to touch $88,185.26 within five hours. This uptick in price coincided with the Bank of Japan’s decision to increase interest rates to their highest level in three decades, a move that has historically stirred waves in both the crypto and stock markets.
This week alone, Bitcoin has witnessed four separate instances where its price jumped by over 2%. Yet, these movements appear fleeting, rapidly losing momentum and reflecting the erratic fluctuations common in previous bear markets for cryptocurrencies. In broader market trends, Nasdaq 100 futures responded favorably, climbing by 0.62% during the same timeframe as the yen weakened, indicating that investors might have already absorbed the rate hike impacts.
Understanding the Rate Hike’s Implications
The Bank of Japan’s decision poses notable implications for risk assets like crypto. Typically, rate hikes are perceived as bearish since they may increase borrowing costs for the yen, which might prompt traders to unwind carry trades. In these setups, investors borrow yen at low-interest rates to pump capital into higher-yielding assets, including U.S. bonds and cryptocurrencies.
Derivatives Positioning: A Telling Sign
- On Friday, Bitcoin’s open interest ascended more quickly than its price, suggesting that this rally might have been driven by leveraged long positions rather than traders scrambling to cover short positions.
- The funding rate for Bitcoin across exchanges soared to 0.085%—the highest since November 21. Notably, it had been negative on multiple occasions over the past month, illustrating a shift in market sentiment.
- A positive funding rate generally indicates bullish sentiment, as those in long positions must pay interest to those shorting the asset. This contrasts sharply with previous negative funding rates.
- Conversely, the altcoin market lacks similar bullish signals. Both SOL and XRP open interest fell by 4.4% and 2.6%, respectively, despite Bitcoin’s rally, indicating traders are cautiously retreating from these speculative assets.
- Funding rates for Cardano’s privacy token, NIGHT, linger dramatically low at -0.1987%, signaling a heavier inclination among traders towards short positions.
- Interestingly, Bitcoin’s long/short ratio reveals a bullish tilt, with 66% of traders having opened long positions over the preceding four hours.
Token Talk: Diverging Paths
- While Bitcoin remains in the spotlight, the wider altcoin market continues to struggle, evidenced by CoinMarketCap’s “altcoin season” indicator sinking to fresh cycle lows of 14/100.
- Ethereum, however, edged upwards against Bitcoin, appreciating by 1.5% between 2:50 a.m. and 10:30 a.m. This uptick comes after a prior downtrend earlier in the week.
- Despite Ethereum’s relative strength, uncertainty lingers, leading to sell-offs in a myriad of other tokens such as RNDR, IMX, WLFI, and ATOM in recent hours.
- For the altcoin market to regain its footing, a sustained increase in Bitcoin’s price could potentially spur investment flows from Bitcoin into these more speculative assets.
- The scant speculative activity is evident in CoinDesk’s memecoin index (CDMEME), which has only seen a modest increase of 2.42% since midnight UTC, while the broader CoinDesk 20 (CD20) index gained 3.68% during the same period.
