Crypto Market Risks Crash On BOJ Rate Hike, FOMC, Options Expiry Headwinds

The crypto market witnessed a selloff as bullish sentiment regarding Donald Trump’s inauguration faded. The global market cap tumbled over 3% to $3.51 trillion, with trading volume tanking 25% over the last 24 hours. The top crypto Bitcoin fell more than 3% to $102K as trading volume declined three-fold today as compared to Trump’s inauguration on Monday.

Ethereum price also fell 3%, continuing the weak sentiment seen last week. Meanwhile, XRP, Solana and other top altcoins mainly saw a 2-5% drop in the last 24 hours. Meme coins Dogecoin and Shiba Inu tumbled amid selloff by whales.

Market Sentiments and Liquidations Triggered Crypto Market Selloff

Coinglass data showed over $250 million in crypto liquidations, with $153 million in liquidations occurring in the last 12 hours. Over 115K traders were liquidated in the past 24 hours, with the largest single liquidation order of BTCUSDT valued at $5.93 million on crypto exchange OKX.

BTC, SOL, ETH, DOGE, TRUMP, and XRP saw massive liquidations, which triggered a selloff in the broader crypto market.

The crypto market selloff was triggered as Trump didn’t mention crypto or Bitcoin in his speech, which faded positive sentiment. Also, the industry participants were awaiting an executive order on strategic Bitcoin reserves or crypto policy. However, the US SEC announced the Crypto Task Force led by Commissioner Hester Peirce to develop a clear regulatory framework for crypto assets.

Bank of Japan’s Interest Rate Hike Decision

The Bank of Japan expects to raise interest rates this Friday to the highest in 18 years, Bloomberg reported on January 23. A 25 bps rate hike to 0.5% by the BOJ would trigger Yen carry trade unwind, risking global liquidity and risk assets such as BTC.

The crypto market can see further selloff as the BOJ rate hike will wipe out optimism around “Trump trade” and meme coins launched by the Trump family. BTC saw sudden drops during the rate hikes by the BOJ last year.

US Fed Interest Rate Decision

The US Federal Reserve’s monetary policy decision and Jerome Powell’s comments will be the key for markets this year. The recent inflation and strong jobs market data have taken Fed rate cut odds off the table at this FOMC Meeting.

CME FedWatch tool indicates there is a 99.5% probability of the Fed keeping interest rate unchanged at 4.25%-4.50% during the January 29 meeting.

Meanwhile, the US dollar index (DXY) has again started climbing toward 109, with a 0.22% to 108.38 today. Also, the 10-year Treasury yield stays near 4.6% amid volatility due to the Trump tariff and other policy decisions. Typically, Bitcoin price moves in the opposite direction to DXY and Treasury yield.

Crypto Market Selloff: Bitcoin and Ethereum Options Expiry

As per Deribit, 29K BTC options of notional value $3 billion are set to expire on Friday, with a put-call ratio of 0.48. The max pain point is $99,000, indicating high odds of another dropdown below $100K. Volatile price movements are always expected during options expiry.

BTC price is currently trading at $102,467, down 3% from the 24-hour high of $105,557. Trading volume has tumbled by 10%.

Moreover, 169K ETH options of notional value of almost $0.5 billion are set to expire, with a put-call ratio of 0.47. The max pain point is $3,300, which is higher than the current price of $3,220. Traders must keep an eye on drastic changes in trading volumes for further fall in ETH prices.