Crypto Daybook Americas: Fed Disrupts Christmas Calm

By Omkar Godbole (All times ET unless indicated otherwise) Those anticipating a peaceful Christmas, expecting a steady rise in bitcoin through the year-end, are in for a surprise. The Federal Reserve has other plans. Firstly, Chair Jerome Powell's comments about the central bank's distance from President-elect Donald Trump's potential creation of a strategic bitcoin reserve have left traders seeking reassurance. Many will likely wait on the sidelines until the new administration fulfills its promises, weakening the market's demand until Trump's inauguration on January 20. The second concern revolves around interest rate projections. Fed officials anticipate only two rate cuts in 2025, expecting the benchmark borrowing cost to drop to 3.9% in 12 months, up from the current 4.25%-4.5% range. This 50 basis-point upward revision from an earlier forecast of 3.40% may lead to market skepticism about a cut below 4% if incoming data indicates persistent inflation and/or labor market strength. According to ING, this situation raises concerns that long-end rates, including the 10-year yield, might be too low. Notably, the 10-year yield has just broken out of a 14-month downward trend that characterized bitcoin's bull run from $30,000 to over $100,000. A further rise in yields could bolster the strong while triggering a broader decline in risk assets, including BTC. Bitcoin dipped below $100,000 overnight, dragging the broader market down with it. This yield breakout poses particular concerns for ether, often viewed as an "internet bond" with an annualized staking yield of around 3%, weakening the case for a sustained bounce in the ETH-BTC ratio. The continued decline in risk-sensitive assets like the Australian and New Zealand dollars and emerging-market currencies, partly reflecting worries about the Chinese economy, also signals caution. However, pullbacks of 20% or more are typical in crypto bull markets, and the overall outlook remains positive. "Looking ahead, heightened volatility is on the horizon as markets adjust to the expectations surrounding Donald Trump’s presidency. Although short-term turbulence may occur, the long-term outlook for Bitcoin and Ether remains bullish," said Valentin Fournier, an analyst at BRN. In this uncertain climate, traders might seek refuge in high-yielding crypto assets like Ethena's USDe, which offers returns of around 12%. Pseudonymous analyst OxJeff suggests these pullbacks could present a golden opportunity to invest in tokens linked to AI-powered systems in the blockchain space. Candidates to watch include AI16Z, ZEREBRO, VIRTUAL, MODE, and DOLOS. Stay alert! What to Watch Token Events Conferences: Token Talk By Shaurya Malwa Memecoins and AI tokens lead Binance users' trading activity. AI tokens are predicted to be the stars of 2025, with nearly 24% of respondents in a survey of 27,000 Binance users saying they'll lead market growth next year. Memecoins are not far behind, with 19% saying they expect them to rise next year. The tokens are fun, popular, and currently the most held crypto assets, with 16% of Binance users owning them. That's even more than bitcoin, at 14%. The survey found that 45% of participants were new to the scene, joining only in 2024 and saying they were "still learning" their way across the market. Over 40% have been around for one to five years. Most aren't betting the farm on crypto, with 44% of respondents having less than 10% of their money exposed to it. Trading, however, is common, with almost a third trading daily. It is not all fun and games, though. Many respondents said they expect to see more maturity and real-world relevance in the crypto industry in the coming year. A notable 19% of the sample said they expect increased crypto regulations over the next 12 months, and 16% anticipate greater participation from traditional financial institutions and institutional investors. In addition, 17% foresee wider implementation of blockchain technology in real-world applications. Derivatives Positioning Market Movements: Bitcoin Stats: Basket Performance Technical Analysis Crypto Equities ETF Flows Spot BTC ETFs: Spot ETH ETFs Source: Farside Investors Overnight Flows Chart of the Day While You Were Sleeping In the Ether