Key Insights
- The price movement of bitcoin was impacted significantly due to inflation rates and U.S. inflation/core PCE data.
- Bank of Japan’s expected rate hike caused a drop in the yen value, adding volatility to global crypto trades.
- The flows in ETF reported a decline in Bitcoin and Ethereum, whereas Solana and XRP recorded small net flows.
The Bitcoin price and crypto markets are expected to experience a volatile trading day with crucial US economic data and a decision from the Bank of Japan on interest rates coming into play.
U.S. Data Fuels Anticipation
Investors in digital assets tracked a busy economic calendar that began with the release of U.S. inflation figures and jobless claims early Thursday.
The markets took cues from releases that included the core Personal Consumption Expenditures (PCE) Index, widely viewed by economists as the Federal Reserve’s preferred inflation gauge.
A crypto market commentator shared on social platform X that the schedule was ripe for sharp swings, with inflation, jobless claims, and core PCE all clustered in morning U.S. data. The thread also noted the Federal Reserve’s balance sheet update in the afternoon, underscoring a complex day for traders.
Stronger-than-expected inflation could delay expectations of interest rate cuts by the Fed. That scenario often pressures risk assets, and short-term crypto market reactions to macroeconomic signals have had a direct influence on Bitcoin price movements in past sessions.
The ongoing focus on U.S. economic reports was widely shared on social platforms. According to a tweet from 0xNobler, traders were warned not to get shaken out amid a packed data schedule that could set the tone for crypto market behavior.
Bank of Japan Decision Reverberates
Markets in Asia reacted strongly to speculation about the Bank of Japan’s policy shift. Tweets from market watchers claimed the central bank would raise its key rate to 100 basis points, marking the highest level in over half a century.
While official confirmation was pending at the time of those posts, bond yields in Japan had already hit record levels, reflecting concern about fiscal plans and political uncertainty ahead of an election.
The yen weakened significantly, and such currency moves often ripple into crypto sentiment.
Currency weakness, particularly in yen trading pairs, has been correlated with short-term increases in demand for risk assets.
In previous episodes, shifts in the value of the yen have been tied to changes in crypto inflows, and the Bitcoin price sometimes responds as traders hedge across markets.
The anticipated move by the Bank of Japan added to global market tension, and crypto traders were parsing shifts in equities and FX alongside digital asset trends as the day unfolded.
ETF Flow Patterns Show Rotation
Flow data also revealed a difference in the allocation of capital between cryptocurrency and traditional investment options. On January 21, Cointelegraph revealed that flagship Bitcoin and Ethereum Spot ETFs experienced net outflows, while smaller alternatives experienced inflows.
There was a net outflow of more than $700 million for Bitcoin-linked funds and close to $287 million for Ethereum fund outflows. Yet, the Solana and XRP Spot ETF reported net gains.
These inflows and outflows indicate that some institutional investors are reallocating their investment from dominant cryptocurrencies into more niche products.
With regard to Bitcoin specifically, the outflows of ETFs represent either portfolio rebalancing or taking short-term profits, suggesting that there has not been a fundamental change in long-term belief among institutional investors regarding Bitcoin’s future value.
Axie Infinity and Token Sector Activity
In addition to Bitcoin and large-cap crypto assets, the gaming tokens also experienced significant changes. According to CoinGecko, the Axie Infinity $AXS token rose over 200% month-on-month, reaching levels not seen since the fall of 2022.
This rise was attributed to a new system for rewarding players. Instead of using tradable items, it created non-transferable tokens that were backed 1:1 and subject to conversion fees to prevent oversupply in the market.
Even though these developments occurred outside of the typical price movement of Bitcoin, they indicate a greater overall feeling about decentralized gaming and blockchain.
The high number of active participants in these niche areas may indicate renewed interest in digital assets beyond major smart contract platforms.
Final Thoughts
The prices of Bitcoin and the broader cryptocurrency market have reached a point where macroeconomic news and government action (policy decisions) may create volatility in prices.
As the market evolves each day, traders are attempting to understand how the various U.S. Economic Data and central bank moves interact with trading activity in the ETP space by monitoring flows into/out of ETPs, exchange-traded products.
