The crypto market’s rich vein of volatility extended into Friday morning, with bitcoin rising from a low of $85,200 at 1:00 a.m. UTC to $88,000 in five hours after the Bank of Japan raised interest rates to their highest level in 30 years.
This marks the fourth time bitcoin has surged more than 2% this week, although each rally has been temporary and quickly faded as the price action resembles the volatile behavior of previous crypto bear markets.
Nasdaq 100 futures rose 0.62% in the same five-hour window as the yen fell, suggesting that rising rates were priced in and investors were not rushing to swap risky assets for Japan’s national currency.
A rate hike from the Bank of Japan is often seen as bearish for risk assets because it could make the yen more expensive to borrow and spur the carry trade, in which traders borrow cheap yen at low rates and use it to buy higher-yielding assets like U.S. bonds, stocks and cryptocurrencies.
Positioning of derivative products
- Bitcoin’s open interest rose faster than the price on Friday morning, showing the move was supported by leveraged long positions rather than investors seeking to cover short positions.
- The overall bitcoin funding rate across all exchanges reached 0.085%, the highest level since November 21, after being negative several times over the past four weeks, according to Coinalyze.
- A positive funding rate indicates a bullish environment, as those holding long positions are required to pay an interest rate to those holding short positions. The opposite is true when funding is negative.
- The altcoin market failed to reflect bullish signals from Bitcoin derivatives, with SOL and XRP open interest falling 4.4% and 2.6%, respectively, despite price movements of less than 1%. This gap suggests that futures traders are slowly abandoning speculative assets.
- Cardano Privacy Token Funding Rate remain heavily depressed at -0.1987%, demonstrating a strong preference for 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 an upward trend as 66% of traders went long in the last four hours.
Symbolic discussion
- As the broader altcoin market continues to suffer, as demonstrated by CoinMarketCap’s “altcoin season” indicator falling to a new cycle low of 14/100, ether resisted this trend by outperforming bitcoin.
- ETH rose 1.5% against bitcoin between 2:50 a.m. and 10:30 a.m., although it should be noted that until Thursday the ETH/BTC trading pair was in a downtrend this week.
- The relative uncertainty and volatile behavior of Bitcoin has had a negative impact on altcoins, with several tokens starting to sell off over the past few hours. RNDR, IMX, WLFI and ATOM all fell.
- In order to regain strength, the altcoin market needs Bitcoin to break through a resistance level and consolidate, which would incentivize capital to shift from Bitcoin gains to more speculative bets.
- The absence of speculation is demonstrated by CoinDesk’s memecoin index (CDMEME), up 2.42% since midnight UTC while the CoinDesk 20 (CD20) is up 3.68% over the same period.
