Crypto Market Braces for Impact as BOJ and Fed Hold Rates Steady

• The Bank of Japan and Federal Reserve kept interest rates unchanged, and crypto markets showed mixed reactions, with Bitcoin dropping to $116,000 before recovering.

• Japan held rates at 0.5% while the US maintained 4.25-4.5% for the fifth straight meeting, but both banks remain ready to adjust if economic conditions change.

• Despite current uncertainties, the total crypto market cap reached $3.89 trillion with modest gains, and experts believe the underlying liquidity could support future rebounds.

The global cryptocurrency market faces uncertainty after the Bank of Japan and the US Federal Reserve maintained current interest rates. Bitcoin dropped to $116,000 before recovering, while Ethereum touched $3,691 following the announcements.

After a two-day policy meeting, the Bank of Japan held its benchmark rate at 0.5%. The decision received unanimous approval from board members. The central bank expressed cautious optimism about Japan’s economic recovery while acknowledging trade policy uncertainties.

BOJ Maintains Hawkish Stance Despite Trade Concerns

Tohru Sasaki, Chief Strategist at Fukuoka Financial Group, noted the central bank’s ability to raise rates if needed. The BOJ revised its inflation forecast through 2026, showing modest increases that suggest persistent price pressures.

“The BOJ can hike interest rates anytime soon. But still, the BOJ continues to be cautious about global risks, especially the tariff policy from the United States,” Sasaki stated. He highlighted different interpretations of the Japan-US trade agreement as a source of ongoing uncertainty.

The central bank pledged to raise policy rates if economic conditions align with forecasts. However, officials emphasized high uncertainty surrounding trade developments and their economic impact. Japan announced a $6.3 billion relief package to counter potential US tariff effects.

The Federal Reserve maintained its federal funds rate at 4.25-4.5% during the latest FOMC meeting. Nine committee members supported the decision, while Governors Christopher Waller and Michelle Bowman dissented, favoring a 25-basis-point reduction.

This marks the fifth straight meeting where rates remained unchanged, following decisions in January, March, May, and June. The Fed’s cautious approach reflects concerns about inflation persistence and economic stability.

Mixed Signals for Cryptocurrency Markets

The total crypto market capitalization reached $3.89 trillion, gaining 0.76% despite rate decisions. Bitcoin currently trades at $118,415 after recovering from its daily low. Ethereum rebounded to $3,860, posting a 1.43% increase. XRP fell to a six-day low of $3.022 before stabilizing at $3.14.

Nick Ruck from LVRG Research suggests the bull market’s pace may slow if the Fed maintains its cautious position. However, underlying liquidity could support an eventual rebound.

Henrik Andersson, Chief Investment Officer at Apollo Capital, remains optimistic about market prospects. “The market had priced in that there would be no rate cut this week, so this is no surprise,” he explained. Andersson believes tariff uncertainties will delay US rate cuts without materially affecting crypto markets.

The cryptocurrency sector faces continued volatility amid trade policy uncertainties and inflation concerns. Both central banks’ measured approaches suggest rate changes will depend on economic data and geopolitical developments. Traders monitor upcoming economic indicators for clearer direction on monetary policy shifts.