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From quantitative tightening to quantitative crypto: How policy shifts are rewriting market rules

From quantitative tightening to quantitative crypto: How policy shifts are rewriting market rules

The Federal Reserve’s less hawkish stance is acting as a catalyst for renewed investor confidence across both traditional and digital asset classes. This shift is occurring as part of a broader recalibration of macro expectations, liquidity dynamics, and institutional posture toward risk.

For those engaged in the evolution of financial systems, particularly at the intersection of decentralised infrastructure and macro policy, the current moment offers insight into how legacy market frameworks are beginning to accommodate the emerging crypto native paradigm, albeit cautiously.

The Fed’s latest policy update, which shows a more dovish tilt relative to earlier guidance, has brought a degree of optimism to markets already sensitive to changes in interest rate trajectories. The decision to implement a 25 basis point rate cut, along with a pause in quantitative tightening, signals that central authorities believe inflationary pressures may be easing enough to allow a recalibration of monetary policy.

This shift coincides with an increase in US initial jobless claims, which rose by 44,000 to 236,000 in the week ending December 6, 2025, exceeding forecasts. Such labour market softness strengthens the case for a more accommodative stance from the Fed, consistent with UOB’s projection of two rate reductions in the second and third quarters of 2026, bringing the Fed Funds Target Rate to 3.25 per cent by the end of 2026.

Equity markets showed a mixed reaction, reflecting relief over the Fed’s stance and caution regarding ongoing macro uncertainties. The Dow Jones rose 1.34 per cent, the S&P 500 gained 0.21 per cent, and the tech-heavy Nasdaq declined 0.26 per cent. This divergence suggests a rotation away from growth-oriented equities toward value and cyclical exposures. A similar dynamic is visible in crypto markets, where Bitcoin’s dominance has increased to 58.75 per cent.

Investors appear to be favouring established, large-cap digital assets as relatively safer options within a volatile risk landscape. This preference for perceived stability aligns with broader portfolio strategies that emphasise quality US equities while leaning toward non-US value and mid-cap exposures.

Fixed income markets also responded positively to the Fed’s policy shift, with US Treasury yields declining. The ten-year yield fell more than 1 basis point to 4.14 per cent, and the two-year yield dropped more than 3 basis points to 3.52 per cent. These movements indicate growing investor appetite for longer duration assets as yield differentials narrow and the path of future rate cuts becomes clearer. Bond yields are becoming attractive again from a strategic perspective, supporting allocations to high-quality fixed income as a counterbalance to equity and crypto volatility.

In foreign exchange markets, the US dollar weakened, with USD/JPY falling 0.3 per cent to 155.48 in its second consecutive session of decline. This weakness is consistent with expectations of further Japanese yen strength as the Bank of Japan signals plans to raise rates in December, narrowing the yield gap with the US.

In commodities, divergent trends emerged. Brent crude fell 1.49 per cent to close at US$61.28 per barrel as market attention shifted to potential progress in Russia-Ukraine peace discussions. Gold rose 1.2 per cent to US$2,880.08 per ounce, reinforcing its role as a defensive hedge in uncertain macro environments.

In Asia, regional equities mostly closed lower following the Fed’s rate cut announcement, though early trading showed mixed performance. The strategic outlook remains overweight on Chinese equities, using a barbell approach that combines exposure to tech innovators and high dividend plays.

Against this macro backdrop, the crypto market rose 2.28 per cent in the last 24 hours, maintaining a seven-day uptrend of 0.3 per cent, though still 9 per cent below its 30-day average. This rebound appears driven not by retail speculation but by institutional momentum and favourable liquidity conditions.

Binance continues to lead global Bitcoin trading volume with a 35.4 per cent share, reflecting its established infrastructure and role as a liquidity hub. More notably, JPMorgan’s execution of a debt deal on Solana during Breakpoint 2025 marks an important moment in institutional adoption of blockchain infrastructure beyond asset speculation. This suggests Solana can support more complex financial instruments, strengthening its credibility among traditional finance participants.

US Bitcoin ETFs recorded US$223 million in inflows, the highest in 20 days, indicating renewed institutional demand for regulated crypto exposure. These flows act as a gauge of professional investor sentiment and show that macro tailwinds are influencing capital allocation decisions. Bitcoin’s price action, however, remains closely tied to equity movements, with a 0.85 correlation to the S&P 500. This dependence highlights a vulnerability: despite gaining institutional legitimacy, crypto has not yet separated itself from traditional risk-on and risk-off dynamics. The recent drop in Bitcoin to US$109,000 during a tech sector selloff illustrates this.

Another factor is the sharp rise in derivatives leverage. Perpetual futures open interest increased 11.6 per cent to US$87.9 billion, while funding rates rose 102 per cent within 24 hours. Bitcoin liquidations reached US$95 million, with 77 per cent coming from short positions, indicating strong bullish momentum but also heightened risk of a leveraged long squeeze. The seven-day RSI of 53 suggests scope for further upside if momentum persists and macro conditions remain supportive.

In conclusion, the current rally reflects a combination of institutional engagement and macro liquidity. However, it continues to unfold within a structure still linked to traditional markets. The Fed’s shift provides short-term support, but sustainability depends on whether crypto can develop independent price drivers rooted in utility, adoption, and network effects.

Key levels to watch include Bitcoin’s US$93,000 resistance and the ETH/BTC ratio, which could indicate altcoin rotation. Solana’s ability to maintain institutional interest after Breakpoint will also be important. While conditions have improved, the market’s structural dependencies and elevated leverage call for cautious optimism rather than strong enthusiasm.

 

Source: https://e27.co/from-quantitative-tightening-to-quantitative-crypto-how-policy-shifts-are-rewriting-market-rules-20251212/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Green dots and red alarms: How a US$3M hack and strategy’s cryptic tweet sent crypto into a tailspin

Green dots and red alarms: How a US$3M hack and strategy’s cryptic tweet sent crypto into a tailspin

The crypto market’s 3.89 per cent decline over the past 24 hours marks a sharp continuation of November’s bearish momentum, carrying a cascade of negative sentiment into the final month of a volatile year. This downturn is not driven by a single catalyst but by a confluence of distinct yet interrelated pressures: technical vulnerabilities in DeFi infrastructure, a violent unwinding of leveraged positions, and a pronounced psychological flight to perceived safety. Together, these forces have reshaped market dynamics in ways that signal deepening caution among participants, especially as institutional and macro-level uncertainties intensify.

The immediate trigger stems from a security breach at Yearn Finance, a protocol long regarded as a cornerstone of the DeFi ecosystem. Attackers exploited a flaw in the yETH liquidity pool, enabling what amounted to an infinite minting attack that drained approximately US$3 million worth of ETH before the funds were routed through Tornado Cash. While the absolute figure may seem modest compared to other exploits, the symbolic weight is heavy. This incident arrives on the heels of a brutal November for crypto security, during which protocols lost an estimated US$127 million to hacks, scams, and exploits according to CertiK.

The cumulative erosion of trust in smart contract integrity poses a fundamental challenge to the narrative of institutional readiness. As DeFi valuations have climbed alongside broader market optimism, the recurrence of such high-profile vulnerabilities exposes a critical gap between market capitalisation and foundational security. For investors increasingly focused on risk-adjusted returns, these events serve as stark reminders that code, not just consensus, remains a fragile link in the value chain.

Compounding this technical vulnerability is a self-reinforcing deleveraging cycle that has gripped the derivatives market. In the past 24 hours, Bitcoin liquidations totalled US$16 million, with short positions alone accounting for a dramatic 410 per cent spike. This surge in short-side liquidations, often triggered as prices fall below key support levels like US$90,000, creates a feedback loop where forced selling pushes prices lower, triggering even more margin calls. The shift is also evident in perpetual futures markets, where funding rates have turned negative at a rate of -0.0019 per cent, a clear signal of prevailing bearish sentiment.

Altcoins have borne the brunt even more severely, with open interest collapsing by 41.65 per cent as leveraged longs were swiftly liquidated. This mechanical sell-off, detached from fundamental news, illustrates how market structure itself can amplify volatility. The situation becomes even more precarious with today’s US$200 billion options expiry looming, particularly given the concentration of large put options at the US$90,000 strike, a potential magnet for further downside price action if liquidity pools are thin or skewed.

In response to this dual pressure of security risk and leverage-driven panic, market participants have executed a classic risk-off rotation. Bitcoin dominance has ascended to 58.75 per cent, its highest level in months, while the Altcoin Season Index has plunged to a meagre 24. This index, which measures the percentage of top altcoins outperforming Bitcoin over a 90-day window, confirms that speculative capital has fled peripheral assets in favour of the perceived safety of the original cryptocurrency. The retreat is further validated by the CMC Fear and Greed Index, which now sits firmly in Extreme Fear territory at 20.

This psychological state is also reflected in the traditional finance corridor of the crypto market, where spot Bitcoin ETFs have experienced significant monthly outflows totalling US$3.79 billion in November alone. The US$122.5 billion monthly outflow figure cited in the prompt appears to be a substantial overstatement compared to available data, which consistently points to outflows in the single-digit billions for November. Regardless of the precise magnitude, the directional trend is undeniable: investors are moving from risk assets back into cash or the relative stability of Bitcoin, prioritising capital preservation over yield or speculative gains.

This backdrop of fear and deleveraging makes the latest communication from Strategy, the largest corporate holder of Bitcoin with nearly 650,000 BTC, all the more significant and unsettling. For over a year, Executive Chairman Michael Saylor has maintained a weekly ritual on X, posting a chart adorned with orange dots to signal an impending Bitcoin purchase.

This Sunday’s post, however, broke the pattern with a simple, provocative question: What if we start adding green dots? The ambiguity of this change has sent shockwaves through a community already on edge. While some optimistically speculate that green dots could represent stock buybacks or other balance sheet manoeuvres, the more alarming interpretation is that it might foreshadow the unthinkable: a sale of Bitcoin.

This fear is not baseless. In a recent podcast, Strategy CEO Phong Le explicitly outlined a contingency plan that directly contradicts Saylor’s long-standing never sell mantra. Le stated that if the company’s market-to-net asset value ratio falls below one and it cannot raise new capital, it would consider selling Bitcoin to fund its perpetual preferred equity dividends. This is a critical admission.

Strategy’s stock price has already crumbled, down 41 per cent year-to-date and roughly 70 per cent from its all-time high. This steep decline has crippled its primary mechanism for acquiring more Bitcoin, issuing new common stock, forcing it to rely on preferred share offerings, a move that has drawn criticism for potentially diluting common shareholders. The company’s market capitalisation has even fallen below the value of its Bitcoin holdings, a stark market judgment on its business model.

The green dots are not a playful tease but a potential distress signal. For a market already reeling from a DeFi hack and a leverage spiral, the prospect that its most vocal and significant corporate Bitcoin holder might become a seller is a profound psychological blow. It would not just be a liquidity event but a narrative one, shattering a core tenet of the HODL philosophy that has underpinned much of the long-term bullish sentiment.

The market’s current state of extreme fear suggests it is in no position to absorb such a fundamental shift in expectations. The confluence of technical vulnerability, mechanical selling, and now a potential reversal in institutional conviction creates a precarious environment as December begins, where trust, both in code and in corporate policy, is the scarcest and most valuable asset of all.

 

Source: https://e27.co/green-dots-and-red-alarms-how-a-us3m-hack-and-strategys-cryptic-tweet-sent-crypto-into-a-tailspin-20251201/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Fed rate cut odds hit 85 per cent: Here’s how stocks, crypto, and gold are reacting

Fed rate cut odds hit 85 per cent: Here’s how stocks, crypto, and gold are reacting

Market movements have shaped a complex but increasingly hopeful outlook across both traditional and digital asset markets, primarily fuelled by evolving expectations about Federal Reserve policy. Central to this momentum is a mounting belief that interest rate cuts are on the horizon. Financial markets now place an 84.9 per cent likelihood on a 25 basis point reduction at the December FOMC meeting. This shift in sentiment has ignited a widespread rally, pushing equities, commodities, and cryptocurrencies higher in a coordinated risk-on surge that underscores how tightly asset prices are now linked to macroeconomic signals.

The labour market data released on November 26 provided critical fuel for this optimism. Initial jobless claims for the week ending November 22 fell to 216,000, marking the lowest level since mid-April and coming in well below the median forecast of 226,000. This third consecutive weekly decline signals continued resilience in the employment sector, but in the current environment where inflation appears to be moderating and growth concerns linger, the market interpreted the report as dovish. This interpretation aligns with UOB’s ongoing forecast of a 25 bps cut in December, now seemingly corroborated by real-time market pricing.

Equity markets responded enthusiastically. On Wednesday, November 26, the S&P 500 rose 0.7 per cent, the Nasdaq gained 0.8 per cent, and the Dow Jones Industrial Average climbed 0.7 per cent, with technology stocks leading the charge. The gains extended a four-day winning streak in a holiday-shortened week, underscoring investor confidence in a pivot toward looser monetary conditions.

Notably, the US market closed early in observance of Thanksgiving, leaving Asian markets to carry the momentum into the next trading session. This global transmission of sentiment was evident in South Korea’s KOSPI, which surged 2.67 per cent on November 26 to close at 3,960.87, its strongest single-day advance in weeks. Regional indices across Asia followed suit, reinforcing a strategic tilt toward non-US value and mid-cap equities as sources of alpha, particularly in technology and dividend-yielding sectors.

Fixed-income markets reflected a more cautious recalibration. The yield on the 10-year US Treasury note held steady at approximately 4.00 per cent, while the 2-year yield edged slightly higher to 3.47 per cent, resulting in a 10Y-2Y spread of about 53 basis points. This modest flattening suggests that while near-term rate expectations are shifting, longer-term inflation and growth concerns remain anchored. Nevertheless, the widening spread between equities and bonds is beginning to make fixed income more attractive, prompting institutional investors to accumulate high-quality bonds in anticipation of a Fed pivot gradually. The relative stability of the 10-year yield amid equity rallies suggests the bond market is not fully pricing in aggressive easing but remains open to modest cuts if inflation data cooperate.

Currency and commodity markets further validated the risk-on narrative. The US dollar weakened broadly, with Asian currencies like the Korean won and Singapore dollar strengthening as the expected narrowing of the Fed-Asia yield differential reduced the appeal of dollar-denominated assets. Brent crude oil edged higher to US$63.04 per barrel, supported by expectations that lower interest rates could stimulate global demand. Even more striking was gold’s ascent to US$4,163.51 per ounce, a 0.8 per cent increase that reaffirmed its role as a defensive hedge amid monetary uncertainty. Gold’s performance, up nearly 58 per cent year-to-date, reflects not just inflation hedging but also a broader loss of confidence in fiat monetary regimes, a theme that resonates deeply in the cryptocurrency space.

Speaking of crypto, the digital asset market rallied 2.5 per cent over the 24 hours ending November 27, reclaiming a market capitalisation near US$3.07 trillion, a key Fibonacci retracement level. This rebound emerged from a state of extreme fear, as measured by sentiment indicators, and closely tracked the Nasdaq’s gains, with a 24-hour correlation of plus 0.84. Three interlocking forces drove this recovery.

First, technical indicators signalled a classic oversold bounce. Bitcoin’s RSI-14 had dipped to 36.09, bordering on oversold territory, while the MACD histogram turned positive, reflecting a shift in momentum. This setup was amplified by a short squeeze; US$74 million in leveraged positions were liquidated, with 87 per cent attributed to short sellers. Such dynamics often accelerate upward price action as forced buying meets opportunistic dip-buying.

Second, Ethereum witnessed significant off-exchange accumulation. On-chain data from Santiment showed a 49 per cent weekly decline in ETH exchange reserves, equivalent to roughly US$4 billion in value. This movement suggests large holders, whales, and institutions are withdrawing supply from liquid markets, tightening available float, and reducing immediate sell pressure. The trend was reinforced by BlackRock’s ETH ETF, which recorded US$92.6 million in inflows on November 24, its first positive flow in two weeks. This institutional re-engagement, occurring just as ETH tests the 3,000-dollar resistance level, points to strategic positioning ahead of potential macro catalysts.

Third, macro tailwinds provided the overarching narrative. With an 85 per cent market-implied probability of a December rate cut, risk assets across the board benefited from renewed liquidity expectations. However, sustainability remains uncertain. Bitcoin’s Puell Multiple, a metric comparing daily miner revenue to its 365-day average, stands at 0.67, above historical bear market bottoms but not yet signalling undervaluation. This suggests that while the macro backdrop is supportive, crypto-specific fundamentals have not yet reached a point of compelling long-term value.

In conclusion, today’s rally is a fragile synthesis of technical relief, institutional accumulation, and macro optimism. The alignment between crypto and equities, particularly the Nasdaq, has turned digital assets into a high-beta proxy for Fed policy expectations. This very correlation exposes crypto to reversal if incoming data, such as the US PCE inflation report, contradicts rate-cut assumptions. Should the Fed deliver as expected, the stage may be set for a sustained recovery. But without improvements in on-chain fundamentals, network activity, user adoption, and real yield generation, the rally may prove ephemeral, a mere leveraged echo of traditional market sentiment rather than a foundation for a new paradigm.

 

Source: https://e27.co/fed-rate-cut-odds-hit-85-per-cent-heres-how-stocks-crypto-and-gold-are-reacting-20251127/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j