Despite the current lack of significant regulatory changes, the cryptocurrency market is witnessing a notable downturn, with investors largely remaining on the sidelines even amidst a seemingly supportive administration. Bitcoin continues to hover within a narrow trading range, failing to breach the critical $100,000 threshold.
As we approach the two-month mark of the new year, several important trends have surfaced from Wall Street activity that merit close observation. Concerns surrounding inflation have resurfaced during the Donald Trump administration, complicating the task of identifying consistent market trends.
At times, the correlation between stocks and bonds has been so pronounced that traditional asset managers are exploring alternative strategies to diversify their portfolios. The buy-and-hold investors are currently feeling particularly aggressive in their market approach.
World Liberty Financial’s Strategic Token Reserve Under Scrutiny
Trump’s World Liberty Financial has introduced a token reserve to support cryptocurrencies, with Justin Sun notably investing $75 million, raising ethical questions about potential conflicts of interest. Recent fluctuations across various asset classes, including cryptocurrencies, stocks, and bonds, suggest a departure from conventional market behavior. These fluctuations are largely attributed to Trump’s unpredictable policy approaches, which encompass tariffs, deregulation, tax reductions, and buyouts of government employees.
The generally stable economic environment is now threatened by Trump’s ambitious ‘shock and awe’ initiatives. Recent troubling inflation statistics have further obscured the economic landscape. Predictions regarding the Federal Reserve’s rate cut cycle were interrupted by consumer prices that exceeded expectations, resulting in rising treasury yields and falling market values.
Despite a strong performance from the US producer price index, speculators found reassurance in its weaker components, leading to a rebound in both bonds and stocks on Thursday—an unusual occurrence. However, the options market activity indicates that Wall Street traders are not showing signs of concern. Last week, the CBOE Volatility Index, which gauges the pricing of S&P 500 options, decreased and is nearing its lowest point recorded in January. Similarly, a stress indicator for debt has also dropped to a two-month low.
In recent weeks, both stocks and bonds have moved together, resulting in positive returns for the year, signaling that portfolios are not generating significant profits. Despite the confusing market dynamics, passive investment funds, which have attracted trillions in capital, appear to be on the verge of a resurgence. Unlike their active management counterparts, these passive managers have capitalized on the re-emergence of certain market themes amid recent turmoil.
The market-weighted S&P 500 index is outperforming its equal-weighted version, growth stocks are significantly outperforming value stocks, and smaller companies are facing challenges. Indications of a potential turnaround for active managers had surfaced until early last week when the trend abruptly ceased. This development is promising for the substantial sums investors have channeled into exchange-traded funds that track the S&P 500 and the Nasdaq 100.
However, the cryptocurrency market is currently experiencing a wave of reversals, confusion, and volatility. No discernible trend seems to be taking hold, suggesting that the favorable developments expected to boost cryptocurrency prices have already been factored into previous highs. Presently, the risks associated with this price action are being preemptively addressed before any major drivers can manifest a consistent upward trajectory.
According to SoSoValue data, net inflows into Bitcoin ETFs remain positive, with the cumulative total net assets reaching $114.41 billion as of Friday. Nevertheless, options data indicates that more positions were closed than opened, which could point to a weakening trend or reduced market activity. As of Thursday, the daily total net open interest (Delta) for US Bitcoin spot ETF options stood at -$120.7 million. This trend suggests that market makers are offloading underlying assets to hedge their positions, resulting in increased sales of Bitcoin ETFs.
Currently, the influence of Trump’s policies is palpable, and the anticipated benefits from potential rate cuts seem to be receding into the future, with each passing day delaying any easing measures. Other potential boosts for risk assets and shifts in trading have had limited impact on cryptocurrencies.
Meteora CEO Steps Down Amid Controversy
Meteora co-founder Ben Chow has resigned in light of allegations related to insider trading associated with LIBRA, denying any wrongdoing while acknowledging connections to the market makers involved with the token.
FTX Initiates Creditor Distributions
FTX has begun the process of creditor payouts, with distributions for larger claims exceeding $50,000 set to commence in the second quarter of 2025, as part of a broader $16 billion payout strategy.
BitGo Launches OTC Trading Desk
BitGo has initiated a global over-the-counter (OTC) trading desk, offering various services such as spot trading, options, and lending, while utilizing its custody network for secure transactions.
DigiFT and Invesco Partner for Tokenized Loan Strategy
Through a collaboration with Invesco, DigiFT now offers accredited investors access to institutional-grade senior secured loans in a tokenized format.
Robinhood Expands Crypto Services to Singapore
Robinhood is set to roll out its cryptocurrency services in Singapore by late 2025 following its acquisition of Bitstamp for $200 million, capitalizing on its regulatory approvals.
Straits Millennium Receives Approval for Payment Institution License
Straits Millennium has obtained in-principle approval for a Major Payment Institution license from the Monetary Authority of Singapore, further enhancing its digital asset service offerings in the region.
Upcoming Event: Consensus Hong Kong
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