Bitcoin Updates: Fed Loosening Policy While BOJ Tightens: Crypto Markets Face Central Bank Tug-of-War

Central Bank Moves Stir Crypto Market Volatility

Recent announcements from the Federal Reserve and the Bank of Japan (BOJ) have intensified turbulence in cryptocurrency markets. The Fed’s plan to conclude quantitative tightening by December 1, 2025, combined with signals that the BOJ may soon raise interest rates, has heightened uncertainty for digital assets.

Bitcoin, which had found temporary stability around $87,000 following a sharp 20% monthly drop, encountered renewed selling pressure as the BOJ’s more aggressive policy stance sparked a global selloff in bonds. Analysts observe that Bitcoin’s price is now influenced by a broader range of international monetary policies, not just decisions from the Federal Reserve.

Conflicting Signals from Major Central Banks

The cryptocurrency market’s recent swings reflect the unpredictable macroeconomic environment. According to the CME FedWatch tool, there is an 80% chance that the Fed will cut rates in December, a move that contrasts with the BOJ’s hints at monetary tightening. This divergence is creating mixed liquidity conditions for investors.

While the Fed’s decision to maintain its balance sheet at $6.57 trillion could spark a crypto rally reminiscent of 2019, the BOJ’s actions have introduced fresh risks. Investors are now faced with navigating these conflicting signals. Fixed-supply projects are being highlighted by analysts as potential havens amid the uncertainty.

Regulatory Shifts Add Complexity

New regulations are further complicating the crypto landscape. The United Kingdom and South Korea have tightened reporting requirements, now demanding identity verification for crypto transactions as low as $680. These measures, designed to combat money laundering, are in line with international standards but may discourage smaller traders.

In the United States, Representative Warren Davidson has introduced the Bitcoin for America Act, which proposes tax exemptions for Bitcoin payments to a national reserve. While this could encourage institutional involvement, the impact remains to be seen.

Bitcoin’s Dominance Amid Altcoin Volatility

A spokesperson for Bitcoin Munari emphasized that their project follows a predetermined schedule, remaining unaffected by broader economic swings. The Altcoin Season Index, currently at 25, underscores Bitcoin’s continued dominance over alternative cryptocurrencies, as noted by market analysts.

Although certain altcoins, such as ASTER and ZEC, have experienced explosive growth—rising over 1,000% in just three months—the overall market remains cautious. Analysts attribute this risk aversion to ongoing regulatory uncertainty and a decline in retail investor activity. Historically, periods of Bitcoin dominance have often preceded surges in altcoin prices.

Looking Ahead: Key Events and Ongoing Volatility

Market watchers are now focused on the possibility of a Fed rate cut in December and the BOJ’s upcoming meeting on December 19, both of which could provide clearer direction. The Fed’s transition to a “Standing Repo Era” has established ongoing liquidity support, while a potential BOJ rate hike could strengthen the yen and draw capital away from U.S. markets. Combined with stricter regulations, these factors point to an extended period of heightened volatility.