The crypto market’s rich vein of volatility extended into Friday morning with bitcoin rises from a low at 1:00 UTC at $85,200 to $88,000 over five hours after the Bank of Japan raised interest rates to the highest level in 30 years.
The move marked the fourth time bitcoin has risen more than 2% this week, though each rally has been temporary and quickly faded as the price action resembles the choppy behavior of previous crypto bear markets.
Nasdaq 100 futures rose 0.62% during the same five-hour window as the yen fell, suggesting that the rate hike was priced in and that investors were in no rush to swap risk assets for Japan’s national currency.
A Bank of Japan rate hike is often thought to be bearish for risk assets because it could make the yen more expensive to borrow and spur the unwinding of the carry trade, where traders borrow cheap yen at low interest rates and use it to buy higher-yielding assets like U.S. bonds, stocks and crypto.
Derivatives positioning
- Bitcoin open interest rose faster than the rate on Friday morning, showing that the move was supported by leveraged long positions rather than investors looking to cover short positions.
- The overall funding rate for bitcoin across all exchanges rose to 0.085%, the highest level since Nov. 21, after turning negative on several occasions in the past four weeks, according to Coinalyze.
- A positive funding rate indicates a bullish environment because those who are long must pay interest to those who are short. The reverse is true when funding is negative.
- The altcoin market failed to mirror bitcoin’s bullish derivatives signals, with SOL and XRP interest down 4.4% and 2.6% respectively despite price moves of less than 1%. The discrepancy suggests that futures traders are slowly exiting the speculative assets.
- Funding rates for Cardano’s privacy token remains heavily depressed at -0.1987%, showing a strong preference on the short side of the trade.
- Bitcoin’s long/short ratio, which compares the net number of accounts that are long to those that are short, shows a bullish bias as 66% of traders went long over the past four hours.
Token talk
- While the broader altcoin market continues to suffer, as demonstrated by CoinMarketCap’s “altcoin season” indicator falling to fresh cycle lows of 14/100, ether bucked this trend by outperforming bitcoin.
- ETH rose 1.5% against bitcoin between 2:50 AM and 10:30 AM, although it’s worth noting that until Thursday, the ETH/BTC trading pair was in a downtrend this week.
- Bitcoin’s relative uncertainty and choppy behavior has negatively impacted altcoins with multiple tokens beginning to sell off over the past few hours. RNDR, IMX, WLFI and ATOM all fell.
- To regain strength, the altcoin market needs bitcoin to rise above a resistance level and consolidate, which would spur capital to flow from bitcoin gains to more speculative bets.
- The lack of speculation is demonstrated by CoinDesk’s memecoin index (CDMEME), which is up 2.42% since midnight UTC, while the CoinDesk 20 (CD20) is up 3.68% over the same period.
