Positive price action earlier in the week was supported by rising geopolitical tensions following the arrest of Venezuelan President Nicolás Maduro by U.S. authorities, which traditionally increases investor interest in alternative assets. In addition, after the holiday period, traders returned to the market with renewed confidence that the U.S. Federal Reserve will maintain a dovish stance in the new year—especially after the end of Chair Jerome Powell’s term and his expected replacement by Kevin Hassett, an economic adviser aligned with President Donald Trump’s administration. In the long term, this transition is seen as adding pressure on the U.S. dollar. Further support for the crypto sector came from expectations that the U.S. Senate will soon pass a comprehensive crypto market structure bill, which media reports say is in the final stages of coordination ahead of a vote scheduled for January 15. However, key issues remain unresolved, including the use of digital assets by senior public officials, the regulatory status of DeFi, and whether stablecoins will be allowed to generate passive income. Market participants hope that the adoption of this foundational legislation will increase the likelihood of new large players entering the market.
By midweek, however, sentiment shifted as the probability of a pause in monetary easing in January increased. Recent comments from Fed officials suggest a more cautious approach due to persistently high inflation and insufficient cooling in the labor market. According to the CME FedWatch Tool, expectations for a rate cut at the end of January fell from 23.5% to 11.6%. Additional localized pressure came from a hack of the Truebit protocol’s reserve system, in which attackers stole 8,535 ETH worth approximately $26.6 million. As a result, the price of the company’s TRU token collapsed to near zero, and significant outflows from crypto exchange-traded funds resumed. Over the past three days alone, more than $1.0 billion exited Bitcoin ETFs, $150.0 million left Ethereum ETFs, and even XRP ETFs— for the first time since their launch in November—recorded outflows of $40.0 million. Overall investor sentiment remains subdued, as reflected by the Crypto Fear & Greed Index holding at a low level of 27.
Under current conditions, most major digital assets are likely to either resume their decline or move into a consolidation phase in the coming week.
