Crypto Markets Today: Bitcoin rallies on Japan rate hike as futures traders pile in

The crypto market's rich vein of volatility extended into Friday morning, with bitcoin BTC$87,981.43 rising from a 1:00 a.m. UTC low of $85,200 to $88,000 over five hours after the Bank of Japan increased interest rates to the highest level in 30 years.

The move marked the fourth time bitcoin has jumped by more than 2% this week, although each rally has been temporary and quickly faded as price action resembles the choppy behavior of previous crypto bear markets.

Nasdaq 100 futures rose by 0.62% during the same five-hour window as the yen fell, suggesting that the rate hike was priced in and investors weren't rushing 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, in which traders borrow cheap yen at low rates and use it to buy higher-yielding assets like U.S. bonds, equities and crypto.

Derivatives positioning

• Bitcoin open interest rose faster than price on Friday morning, showing that the move was backed by leveraged long positions rather investors looking to cover short positions.
• The aggregate funding rate for bitcoin across all exchanges rose to 0.085%, the highest level since Nov. 21, after being negative on several occasions in the past four weeks, according to Coinalyze.
• A positive funding rate indicates a bullish environment because those holding long positions are required to pay a rate of interest to those shorting. The inverse is true when funding is negative.
• The altcoin market failed to mirror bitcoin's bullish derivatives signals, with SOL and XRP open interest dropping by 4.4% and 2.6%, respectively, despite price movements of less than 1%. The discrepancy suggests futures traders are slowly exiting the speculative assets.
• Funding rates for Cardano’s privacy token NIGHT$0.06744 remain heavily depressed at -0.1987%, demonstrating 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 against those that are short, shows a bullish skew as 66% of traders went long over the past four hours.

Token talk

• While the wider altcoin market continues to suffer, as demonstrated by CoinMarketCap’s “altcoin season” indicator falling to fresh cycle lows of 14/100, ether ETH$2,959.48 bucked that trend by outperforming bitcoin.
• ETH rose by 1.5% against bitcoin between 2:50 a.m. and 10:30 a.m., although it's worth noting that until Thursday, ETH/BTC trading pair was in a downtrend this week.
• The relative uncertainty and choppy behavior of bitcoin has negatively impacted altcoins with several tokens began to sell-off in past couple of hours. RNDR, IMX, WLFI and ATOM all fell.
• In order to regain strength the altcoin market needs bitcoin to rise above a level of resistance 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 by 2.42% since midnight UTC while the CoinDesk 20 (CD20) is up by 3.68% over the same period.