Crypto Market Capitalization Falls to Eight-Month Low – Bitcoin Shows Resilience Despite Interest Rate Shift

Bank of Japan Raises Rates to Highest Level in Three Decades

The Bank of Japan (BoJ) raised its key interest rate as expected by 25 basis points to around 0.75 percent, reaching the highest level in three decades ^[1][2]. The decision ended the latest phase of "cheap" money in Japan and immediately caused turbulence in the crypto market ^[1][2].

Contrary to expectations, however, Bitcoin reacted positively to the interest rate decision. The largest cryptocurrency gained 2.5 percent compared to the start of the day ^[1] and rose 2.3 percent after the Japanese central bank announced its decision ^[3].

Market Capitalization at Eight-Month Low

The total market capitalization of the crypto sector fell to around $2.93 trillion in late trading according to CoinGecko, reaching the lowest level since April ^[2]. This represents a decline of approximately 33 percent from the all-time high of around $4.4 trillion in early October ^[2]. Year-to-date, the overall market is down nearly fourteen percent ^[2].

Bitcoin moved within an intraday range between $84,000 and $89,000, trading around ten percent below the monthly high of $94,650 ^[2]. During the volatility, the price briefly hit a low of $84,390 ^[1]. Ethereum also showed high volatility, fluctuating between $2,700 and $2,900 ^[2].

Experts See Interest Rate Hike as Bullish Long-Term

Arthur Hayes, former CEO of crypto exchange BitMEX, was among several commentators who viewed the interest rate hike as ultimately bullish for asset holders ^[1]. "Don't fight the BOJ: -ve real rates is the explicit policy," Hayes wrote on X, predicting: "$JPY to 200, and $BTC to a milly" ^[1].

Research project Temple 8 Research identified an emerging confrontation between market expectations and economic reality in Japan ^[1]. "The market sees a hawkish pivot. We see a political ceiling," it summarized in a blog post ^[1]. Temple 8 predicted that rates would not rise again before 2027 to protect the yen and avoid increased interest payments on Japan's recent $140 billion stimulus package ^[1].

Extreme Fear in Market – Experts See Buying Opportunities

The Crypto Fear & Greed Index slipped to 16 points, continuing to signal extreme fear ^[2]. Blockchain analytics platform Santiment reported that crypto sentiment had returned to fear levels ^[3]. "Commentary is mainly showing fear after Bitcoin bounced to $90.2K yesterday, and then quickly retraced to $84.8K," Santiment explained ^[3].

Within 24 hours, liquidations totaling several hundred million dollars occurred, with long positions accounting for the majority ^[2]. Open interest in Bitcoin futures declined significantly, while funding rates slipped into negative territory ^[2].

Nick Ruck, Director at LVRG Research, told Cointelegraph that the recent decline in total market capitalization "reflects a broader correction driven by macroeconomic pressures and reduced risk appetite among investors" ^[3]. "While short-term volatility persists, this pullback presents potential accumulation opportunities in fundamentally strong projects," he added ^[3].

Onchain analytics platform Checkonchain warned that while Bitcoin is currently testing a bottom, the process is not yet complete ^[1]. The platform identified $81,000, the cost basis for U.S. spot Bitcoin ETFs, as a critical level ^[1].