Crypto Market Digested Falling Inflation, Rising BOJ Rates

Key Notes

• The US CPI came in lower than the expected 3%.
• Japan’s CPI also declined, but the central bank increased the interest rates by 25 bps.
• Bitcoin, along with many leading altcoins, showed steady growth right after the macro announcements.

The falling inflation in the US and Japan raised hopes for easier Fed policy, while Japan’s surprise rate hike added global tightening pressure. The US Consumer Price Index revealed a 2.7% year-over-year inflation for November, lower than the expected 3.1%, according to data from Investing.com. This was the first US CPI report since late October.

Quite similarly, Japan also recorded a slight decline in its November YoY CPI, falling from 3% to 2.9%. 

The Bank of Japan, however, announced it has decided to increase its interest rates by 25 basis points to 0.75% on Thursday, Dec. 19. 

According to Wu Blockchain, this is the highest level for the country’s interest rates in 30 years. A higher rate can strengthen the Japanese yen and attract capital to Japan.

On the other hand, rising rates can also pull money out of risky assets like cryptocurrencies into safer bonds and currency positions, tightening liquidity globally.

Mixed Signals, but Good Reactions

The cooling inflation in both of the leading economies triggered inflows for risky assets like cryptocurrencies and stocks despite Japan’s rate hike. For instance, the S&P 500 gained 0.79% to 6,774.7, and the global crypto market cap increased by 0.7% to $2.93 trillion. According to a Coinspeaker report, José Torres, senior economist at Interactive Brokers, a cooling inflation would not only trigger a year-end rally, but will likely pave the way for more rate cuts in 2026.

Bitcoin

BTC
$87 841



24h volatility:
1.0%


Market cap:
$1.75 T



Vol. 24h:
$65.21 B

rose by 1.2% to nearly $88,000. Ethereum

ETH
$2 948



24h volatility:
3.7%


Market cap:
$355.89 B



Vol. 24h:
$38.65 B

gained 4%, reaching $2,950. Historically, the crypto market can normally see volatility, quick ups and downs, after CPI reports and interest rate decisions.

These movements suggest that risk assets digested the mixed news from the falling inflation and rising interest rates well.

The next macro signals to watch would be the US Fed’s signals, the yen’s movements in the coming months, and the global liquidity level.

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