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Fed Cuts Interest Rates by 25 Basis Points, Bitcoin Slips Below $104K on Hawkish Tone

The price of bitcoin, already lower from yesterday, dipped below $104,000 in the minutes following the announcement.

The U.S. Federal Reserve lowered its benchmark fed funds rate by 25 basis points to the 4.25%- 4.50% range, its third consecutive easing move this year and now marking a total of 100 basis points of rate cuts since September.

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Market participants had fully expected Wednesday’s move by the central bank, but recent data had shown continued solid economic growth and perky inflation. This turned the focus today to the policy statement, updated economic projections and the upcoming press conference with Chairman Jerome Powell for clues about the Fed’s thinking on future policy actions.

The Fed’s quarterly economic projections — which include the “dot plot” indicating where the central bank expects the Fed funds rate to land over time — reveal that policymakers expect the Fed funds rate to decline to 3.9% by year-end 2025 or another 50 basis points in rate cuts next year. That’s higher than the 3.4% projected in September, signaling a less dovish monetary policy in 2025.

Already lower in the session, the price of bitcoin (BTC) traded slightly above $104,000 in the minutes following the announcement. The S&P 500 index also fell to a session low on Wednesday.

“I think the biggest headache for the Fed right now is the fact that financial conditions have still tightened despite the Fed cutting rates,” Andre Dragosch, European Head of Research at Bitwise, told CoinDesk prior to today’s action. “Long bond yields and mortgage rates have increased since September and the dollar has appreciated which also implies a tightening in financial conditions.”

“A continued appreciation of the US dollar also poses a macro risk for bitcoin since dollar appreciation is associated with global money supply contraction as well which tends to be bad for bitcoin and other crypto assets,” Dragosch continued. “In fact, Fed net liquidity continues to decrease. Tightening liquidity and strong dollar is also the biggest risk for BTC in my view … On the other hand, on-chain factors for BTC continue to be very supportive, in particular the ongoing decline in exchange balances which supports the hypothesis that the BTC supply deficit continues to intensify.”

Fed Chairman Jerome Powell will hold a post-meeting press conference at 2:30 pm ET, which will provide further signals about the U.S. central bank’s intentions.

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Deutsche Bank’s L2 Blockchain to Be ‘Public and Permissioned,’ Says Tech Partner

The banking giant is building a rollup on Ethereum using Matter Labs’ ZKsync technology.

Banking giant Deutsche Bank is building out a layer-2 rollup network on Ethereum with Matter Labs’ ZKsync technology.

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Bloomberg reported the project Wednesday, and a representative for Matter Labs confirmed the story.

The chain will be “a public and permissioned L2,” Omar Azhar, the head of business development at Matter Labs, told CoinDesk over Telegram. When asked to elaborate, he referred a reporter to another participant in the project, Memento Blockchain, which did not immediately respond to a request for comment. Generally “public permissioned” means anyone can see what’s happening on the network but only authorized participants can do certain things.

The project is a sign of a renewed interest in blockchain technology among institutions, as prices for various cryptocurrencies reach all-time highs. It also echoes the private enterprise blockchains that were in vogue nearly a decade ago. Those systems were disconnected from public chains like Ethereum and Bitcoin, though they sometimes borrowed code from them.

According to the Bloomberg report, the bank is creating the layer-2 network in order to address regulatory compliance issues that come with public blockchains in finance. (Regulated institutions have to know who they are dealing with, which is hard in completely open networks like the main Ethereum chain). The bank believes that by creating a layer-2 on top of Ethereum, it will improve the speed of transactions as well as address those compliance needs.

The ZKsync-based rollup could allow banks to experiment with blockchains, and let them select which validators could run said blockchain, Boon-Hiang Chan, Deutsche Bank’s Asia-Pacific industry applied innovation lead, told Bloomberg. The L2 blockchain may also give regulators “super admin rights,” allowing them to look more deeply into the movement of funds, Chan said.

Memento Blockchain announced the L2 endeavor on Nov. 6, but it received little attention at the time. The chain is currently in a test network environment. It is built with ZK Stack, a customizable toolkit that lets developers build their own blockchains based on ZKsync’s technology.

The L2 is part of Dama 2, a multi-chain initiative led by Deutsche Bank. Dama 2, in turn, is part of the Singapore Monetary Authority’s Project Guardian, which is bringing together 24 major financial institutions that are looking into ways to use blockchains to tokenize their assets.

‘DeFi on Bitcoin’ Gets a Boost as BOB L2 Integrates $6B BTC Staking Protocol Babylon

The integration allows BOB, a “hybrid L2,” to use Bitcoin as its anchor chain where transactions with assets from other chains can be irreversibly recorded.

BOB, the “hybrid layer-2” network seeking to make Bitcoin the center of the decentralized finance (DeFi) universe, has taken a step toward that goal by integrating with BTC restaking protocol Babylon.

An abbreviation of “Build on Bitcoin,” BOB’s aim is to establish Bitcoin as the foundational network for DeFi by creating bridges between itself and other blockchains, using Bitcoin as the anchor chain to finalize transactions.

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Integrating with Babylon forms part of BOB’s roadmap by giving it “Bitcoin finality,” the point at which a transaction is permanent and irreversible on the oldest blockchain. Assets deposited from other chains on BOB would be confirmed and verified on Bitcoin via Babylon’s protocol.

Babylon, which is billed as a way of using BTC to secure other protocols and decentralized applications, is the foremost Bitcoin staking project in the sector, with total value locked (TVL) of around $6 billion.

Staking refers to offering up crypto tokens to support the running of a blockchain network in return for rewards, similar to accruing interest in a bank account.

Such a process is fundamental to networks like Ethereum and Solana which run on a “proof-of-stake” mechanism, but is absent from Bitcoin, which use “proof of work.”

However, given that the total market cap of bitcoin is greater than every other crypto asset combined, projects like Babylon are exploring ways of tapping into BTC’s deep reserves to benefit the broader industry.

This week, Babylon completed its third staking round in which it took its total BTC staked to 57,290 ($5.93 billion), placing it in the top 10 protocols by TVL, according to data tracked by DeFiLlama.

BOB’s next step is to launch bridges connecting Bitcoin to other networks, using BitVM, a computing paradigm designed to allow Ethereum-style smart contracts on the world’s original blockchain. BitVM is set for testnet release in Q1 of 2025.

Bitcoin’s Nosedive to Under $100K Shaves $700M Crypto Longs, XRP Drops 5%

XRP and DOGE futures recorded an unusually high $70 million in liquidations, indicative of rising speculative activity in majors.

A bitcoin (BTC) slump spiraled into over $700 million worth of liquidations across futures tracking major tokens, with XRP and dogecoin (DOGE) products recording unusually high losses.

BTC fell under $100,000 in late U.S. hours before slightly recovering during early Asian hours Thursday, as the Federal Reserve hinted at a few rate cuts in 2025. Fed chair Jerome Powell then said at a post-FOMC press conference that the central bank wasn’t allowed to own bitcoin under current regulations — in response to a question about President-elect Donald Trump’s strategic reserve promises.

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“That’s the kind of thing that Congress should consider, but we are not looking for a law change,” Powell said. In a July campaign, Trump said the government would keep 100% of all the bitcoin it currently holds or acquires in the future under his administration — referring to the stockpile of seized BTC held by the country.

BTC fell 3% after Powell’s comments, causing a dive across majors. XRP, dogecoin (DOGE) and Solana’s SOL fell as much as 5.5%, with BNB Chain’s BNB and ether (ETH) down 2.5%. Chainlink’s LINK fared the worst with a 10% drop — erasing some gains from earlier in the week as Trump-backed World Liberty Financial purchased $2 million worth of the tokens.

The market slide led to over $700 million in bullish bets liquidated, with futures tracking smaller altcoins and meme tokens recording higher losses than BTC or ETH futures in an unusual move, data shows.

A liquidation occurs when an exchange forcefully closes a trader’s leveraged position due to the trader’s inability to meet the margin requirements. Large-scale liquidations can indicate market extremes, like panic selling or buying.

A cascade of liquidations might suggest a market turning point, where a price reversal could be imminent due to an overreaction in market sentiment.

Some traders say Powell’s comment may mark a local top, dampening expectations of a continued rally toward the end of the month.

“Crypto markets may have entered a peak if a U.S. Bitcoin strategic reserve is no longer in play, as this promise helped to fuel the recent months’ rally to new all-time highs, Nick Ruck, director at LVRG Research, shared with CoinDesk in a Telegram message. “Although an interest rate cut would normally have a bullish reaction since it was largely expected, the market strongly reacted after Fed Chair Jerome Powell stated that inflation would be a continuing problem throughout the next year.”

Traders at Singapore-based QCP Capital, however, remain generally bullish for the coming year.

“Don’t get shaken out of your positions if a drop occurs. With 2025 poised to be a potentially bullish year for crypto, particularly with Trump in office, staying the course may prove beneficial,” the company said in a Thursday broadcast message.

Hawkish Fed Has Bitcoin Market Showing Strongest Bias for Downside Protection in 3 Months

Short-term BTC puts are in demand after hawkish Fed dented the bullish sentiment in risk assets.

Crypto traders initial worries about a hawkish Fed materialized Wednesday as Chairman Jerome Powell cut interest rates but expressed uncertainty about the speed and extent of future easing. And now the sentiment has deteriorated.

Bitcoin’s seven-day call-put skew shows that Deribit-listed put options offering downside protection and expiring in one week are trading at the highest implied volatility premium to call options since September, according to data source Amberdata. In other words, put options are the most expensive relative to calls in three months.

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Its a sign of traders scrambling to hedge their bullish bets against a potential continuation of Wednesday’s price slide, triggered by a hawkish Fed.

The dour sentiment is also evident from the negative one-month skew, reflecting a bias for puts and a significantly weaker call bias in options ranging from two to six months. These calls traded at a 3 vol premium to puts at press time, down from the 4-5 vol premium observed early this month.

On Wednesday, the Fed cut the benchmark interest rate by 25 basis points to the 4.25% to 4.5% range. That’s 100 basis points lower than the September levels when it began the easing cycle.

Bitcoin declined following the rate cut, as Fed Chairman Jerome Powell described it as a close call and emphasized caution regarding future moves as rates

Trump-Backed World Liberty Financial Swaps Its cbBTC for WBTC After Sun Joins as Adviser

The swap took place Wednesday, the same day BiT Global lost a court case seeking to prevent Coinbase delisting WBTC.

World Liberty Financial, backed by the family of U.S. President-elect Donald Trump, on Wednesday exchanged about $10 million worth of Coinbase’s (COIN) wrapped bitcoin, cbBTC, for rival WBTC.

Wrapped bitcoin is a form of the world’s largest cryptocurrency that can be used in decentralized finance (DeFi) on blockchains other than Bitcoin.

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Coinbase introduced cbBTC in September, and in November said it would delist WBTC, citing its listing standards. That action prompted BiT Global, a custodian involved in WBTC, to sue the crypto exchange to prevent the removal. A court ruled against BiT Global on Wednesday.

There’s one more link in the chain: Justin Sun, the founder of the Tron blockchain and one of CoinDesk’s Most Influential 2024. In its defense, Coinbase cited BiT Global’s links to Sun, who has been accused of fraud and market manipulation in the U.S., as an “unacceptable risk.” Sun, who denies the accusations, also became an adviser to World Liberty Financial, a position he gained after picking up a $30 million stake in the platform last month in exchange for WLFI tokens.

https://twitter.com/lookonchain/status/1869542379163934925

World Liberty Finance has not explicitly stated its decision to swap the tokens. On-chain data shows it has been active in the market in the past week, picking up millions of dollars worth of Aave (AAVE), Chainlink’s LINK and Ethena’s ENA tokens, all companies related to it through partnerships or integrations.

Sun has little to do with WBTC directly. In August, BitGo, the original and longtime custodian of the bitcoin backing WBTC, said it would distribute control over the project’s custody to three entities globally (including BiT Global) instead of just one to help decentralize the operation.

BiT Global is registered as a Trust and Company Service Provider (TCSP) in Hong Kong and is a “strategic partnership between BitGo, Justin Sun, and the Tron ecosystem,” according to the August release.

Sun has no direct or indirect involvement on the cap table of those companies or the listed shareholders of BiT Global, board member Robert Liu said in an October interview

Some board members believe Sun’s involvement is actually “good for WBTC,” he said, given the success of Tron, crypto exchange HTX and other businesses.

“The Tron blockchain has more than 50% of global market share,” Liu said. “They have the highest turnover rate. So people have no issue putting more than $60 billion of the stablecoin assets circulating on Tron blockchain.”

U.S. Listed Spot Bitcoin ETFs on the Verge of Surpassing Gold ETFs

U.S. spot-listed bitcoin ETFs currently have an AUM of $120 billion compared to gold’s $125 billion.

The year 2024 has marked a significant breakthrough for digital assets, particularly for bitcoin (BTC), driven by increased institutional adoption. This shift has occurred through two key avenues: first, the integration of bitcoin into public balance sheets as a treasury asset, and second, the success of U.S. spot-listed exchange-traded funds (ETFs) that have amassed over 1 million BTC.

A report from K33 Research reveals that U.S.-listed bitcoin ETFs have surpassed U.S.-listed Gold ETFs in terms of assets under management (AUM), including leveraged products such as futures-based ETFs. As of Dec. 17, Bitcoin ETFs reached assets under management (AUM) worth $129.25 billion, edging out Gold ETF AUM at $128.88 billion, according to Vetle Lunde, analyst at K33 Research.

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However, when comparing spot-based products exclusively, Gold remains slightly ahead. According to Senior Bloomberg ETF Analyst Eric Balchunas, U.S. bitcoin spot ETFs hold $120 billion in AUM compared to $125 billion for Gold ETFs.

CME activity remains strong

The CME exchange, primarily used by institutions, continues to have strong activity, with futures open interest approaching new highs, with 212,635 BTC in open interest contracts.

According to the report, the basis trade premium has continued to rise, reaching 16.4% — the highest level since November 2023. This indicates that CME traders anticipate increased momentum as the year comes to a close.

The report notes, “January contracts are trading at sharp premiums relative to December contracts, with the contango widening to 1.5% on Monday — the highest next-month premium recorded since November 2023. The December contract on CME remains the most valuable, with open interest equivalent to 113,480 BTC. The upcoming December roll is expected to be significant, as several upcoming banking holidays may contribute to a further widening of the January premium.”

The momentum has continued for the past month, as the U.S. spot-listed bitcoin ETFs have seen net inflows every day since Nov. 27, totaling $6.5 billion, according to Farside data. It is important to note that as the basis trade premium continues to widen and with a growing amount of open interest contracts on the CME, a large portion of these net inflows are part of the cash and carry trade.

Disclaimer: This article, or parts of it, was generated with assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk’s full AI Policy.

Bitcoin Miners Are Expected to be Profitable in December, Jefferies Says

November was a strong month for the miners as the rally in bitcoin outpaced the rise in the network hashrate, the report said.

BTC’s rise to record highs earlier this week is expected to allow miners to extend their November profitability into December, according to a report by investment bank Jefferies on Wednesday.

Bitcoin mining economics improved in November as the average price of bitcoin was 31% higher while the average network hashrate rose by almost 4%, the report said.

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The hashrate, representing the total computing power dedicated to a network, is a proxy for competition in the industry and mining difficulty.

“Average daily revenue per exahash was $55,649, which represented a 20.7% month-on-month increase,” analysts Jonathan Petersen and Jan Aygul wrote.

U.S.-listed miners mined less bitcoin in November than the previous month, the bank said. Still, they mined more on a “network basis,” accounting for 24.7% of the total network.

The bank noted that uptime improved, which could be partly due to colder temperatures as winter approaches.

MARA Holdings (MARA) mined the most bitcoin, with 907 in November, and CleanSpark (CLSK) was second, with 622, the report noted.

MARA’s installed hashrate remained the largest in the sector at 46.1 exahashes per second (EH/s), followed by CleanSpark at 33.7 EH/s, the report added.

Read more: Bitcoin Mining Economics Continued to Improve in December, JPMorgan Says

Bitcoin Miner Hut 8 Buys $100M BTC Boosting Total Total Stash to $1B

The miner bought about 968 bitcoin for average price of around $104,258 each.

Another bitcoin miner, Hut 8 (HUT), has decided to pull the trigger on buying bitcoin in the open market, following the likes of MicroStrategy (MSTR) and MARA Holdings (MARA).

The Miami, Florida-based company said it bought about 990 bitcoin for an average price of $101,710 each. The latest purchase will bring the amount of bitcoin held in Hut 8’s reserve to 10,096, or about $1 billion in market value, and make it among the top 10 largest corporate owners of bitcoin, the company said in a statement on Thursday.

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The miner is planning to use the reserve through options strategies, pledges, sales or other strategies, according to the statement. Hut 8’s CEO, Asher Genoot, told CoinDesk that his firm will be opportunistic in buying more bitcoin in the open market.

“Today, the market recognizes and values our strategic reserve, which effectively lowers our cost of capital and strengthens our financial position. As long as this market dynamic persists, we will remain opportunistic in expanding our Bitcoin reserve,” Genoot said.

The move follows Hut 8’s announcement earlier this month that it started a new $500 million at-the-market share issuance program. At the time, the firm said some of the proceeds from the fund would be used to buy bitcoin in the open market, among other things.

MicroStrategy, the largest corporate holder of bitcoin on its balance sheet, started the trend of buying bitcoin in the open market. It wasn’t until MARA Holdings’ purchase of bitcoin in the open market this year that this became prominent among the miners. Most recently, peer Riot Platforms (RIOT) bought 667 bitcoin at an average price of $101,135 on Dec. 16.

Buying large amounts of bitcoin in the open market has paid off for miners opening up new avenues of raising funds at a time when the industry is grappling with a profit squeeze after the recent Bitcoin halving event. Last month, MARA was able to raise $1 billion in convertible debts—a financial instrument where investors can convert debt into equity—with zero interest. This means investors are willing to let go of the interest income from the debt for the equities that provide them with exposure to bitcoin.

Hut 8 said holding bitcoin reserve serves as a flexible option for the firm that can help the company grow. “We view our strategic reserve as a dynamic financial asset that can be actively managed to drive returns well beyond simple price appreciation,” Genoot told CoinDesk.

“Together with the significant investments we are making to expand our core operating business—with a clear path to 24 EH/s of self-mining capacity by Q2 2025—strategic Bitcoin purchases in the open market can strengthen our balance sheet and ability to invest thoughtfully in growth,” he said.

Shares of Hut 8 have risen 74% this year, while CoinShares Valkyrie Bitcoin Miners ETF (WGMI) climbed 28%.

VIX’s Second-Largest Spike in History Indicates a Local Bottom for Bitcoin: Van Straten

The VIX jumped 74% yesterday after a 25bps rate cut and a hawkish outlook from Fed Chair Jerome Powell.

Wednesday, Dec. 18, will go down in history as a day of market panic triggered by the 25 basis point Fed rate cut and Chair Jerome Powell’s hawkish outlook.

Bitcoin (BTC) briefly tumbled below $100,000; U.S. equities dropped around 3%, while the dollar index (DXY) index soared to a two-year high of 108, which continues to put pressure on currencies worldwide.

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The most significant movement came from the CBOE Volatility Index (VIX), which skyrocketed by 74%, marking the largest one-day jump in the Wall Street’s so-called fear gauge since Feb. 5, 2018. It was also the second-largest increase in its history. The VIX serves as a measure of market fear and expected volatility over the next 30 days.

Historically, significant spikes in the VIX have marked local bottoms for both bitcoin and the S&P 500.

Examining the top three one-day changes in the VIX, the first occurred on Feb. 5, 2018, when it surged by 116%. On that day, bitcoin plunged 16% to $6,891, which turned out to be a local bottom. By Feb. 20, prices had rebounded to over $11,000.

The second-largest spike in the VIX occurred on Dec. 18, registering a 74% increase.

The third biggest spike happened on Aug. 5, 2024, during the Yen carry trade unwind, when the VIX jumped 65%. On that occasion, bitcoin dropped 6% to hit a local bottom around $54,000 and climbed back up to over $64,000 by Aug. 23.

A similar pattern has consistently played out in the S&P 500 over the years, data shared by Charlie Bilello, chief market strategist at Creative Planning, show.

Let’s see if history repeats itself. At press time, BTC traded above $102,000 while the S&P 500 futures pointed to a positive open with a 0.37% gain.