BOJ’s Hawkish Tone Triggers Steep Bitcoin Drop: Crypto Markets Update

Bitcoin’s price tumbled on Monday in a sharp downturn that began moments after CME’s bitcoin futures market reopened, a move intensified by hawkish comments from the Bank of Japan. The sell-off dragged the CoinDesk 20 Index down nearly 6% over the past 24 hours, extending weakness across the broader crypto market.

The drop occurred against the backdrop of still-fragile liquidity conditions. The market has yet to recover from October’s $19 billion liquidation wave, leaving prices more vulnerable to abrupt swings. The pressure deepened after Bank of Japan Governor Kazuo Ueda suggested that a rate hike could come as early as this month—remarks that pushed Japan’s 30-, 10-, and 2-year government bond yields to their highest levels since 2008. A stronger yen would likely force hedge funds that borrow the currency to buy risk assets like bitcoin to rethink their positioning.

Derivatives market reaction

Futures markets saw rapid outflows as open interest (OI) in ZEC, SUI, UNI and ENA plunged by more than 10% in 24 hours.
Bitcoin’s OI slipped 2%, while ether’s OI climbed to 12.51 million ETH—the highest level since Nov. 21—pointing to an uptick in bearish shorting activity.
Funding rates turned deeply negative across major altcoins, with annualized levels ranging from -7% to -11% for SOL, BBB, XRP, AVAX and DOT, reflecting a strong bias toward short exposure.
Volatility quickly accelerated: Volmex’s BVIV, a 30-day bitcoin implied volatility gauge, spiked above 55% during Asian trading before easing to 53%.
Options markets echoed the risk-off tone, with short-dated BTC and ETH put skews strengthening on Deribit.
Block trades featured strategies such as BTC strangles and ETH straddles—typical setups for traders anticipating heightened volatility.

Altcoins deepen the slide

Altcoins absorbed some of the market’s heaviest losses. ZEC sank 20%, ENA dropped 16% and TIA declined 14% in the past day. Of the $637 million in total liquidations over the past 24 hours, more than $430 million came from altcoin positions, as several tokens formed lower highs and extended multi-week downtrends.

The market now sits near a critical threshold. A break below November’s lows would solidify a full reversal from the highs seen in early October. However, technical indicators offer a glimmer of hope: the average RSI is flashing oversold conditions, opening the door for a potential relief rally as short traders move to lock in profits.

A few tokens still managed to post weekly gains. Layer-1 token KAS climbed 29% over the past seven days, while SKY—formerly known as MKR—rose 17% after a series of buyback announcements.

Despite these isolated bright spots, the “altcoin season” index remains firmly subdued at 24/100, down sharply from its September peak of 78/100. The reading underscores a broader investor preference for bitcoin, which continues to command the largest share of liquidity during periods of heightened volatility.