January 16, 2025

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Trading Desk Insights

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The cryptocurrency market has recently enjoyed a strong bullish trend, largely driven by the core inflation data, which eased concerns about a hawkish Federal Reserve. However, as of this morning, the momentum appears to have slowed. Despite this, overall sentiment remains positive, with many traders optimistic that BTC will break through its previous record highs as we approach the inauguration of pro-crypto President-elect Donald Trump on January 20th. For the time being, open interest in BTC has dropped by about 16% from its peak, with volume showing a similar downtrend. The market is once again in a holding pattern, awaiting a catalyst for the next breakout. Fortunately, there have been some positive developments in the last 24 hours that could reignite the market's bullish sentiment:

- President-elect Trump is reportedly open to establishing an "America-first" strategic reserve, which would prioritize cryptocurrencies like SOL and XRP.
- Federal Reserve Governor Christopher Waller has hinted that "three or four rate cuts" could be on the table this year.
- Ripple's Chief Legal Officer stated that the SEC's lawsuit against the company is "likely to be abandoned by the next administration."
- Texas Senator Charles Schwertner has introduced a bill to create a state-level Bitcoin reserve.
- Oklahoma is following suit with its own "Strategic Bitcoin Reserve Act," aiming to buy and hold Bitcoin as a state asset.
- Italy's largest bank has revealed plans to prepare for increased Bitcoin demand from institutional clients.
- Trump's incoming SEC administration is expected to overhaul crypto policy, possibly pausing enforcement actions, according to Reuters.
- The U.S. government has announced plans to return 120,000 Bitcoin, valued at $11.87 billion, seized from the Bitfinex hack to its rightful owners.

However, traders should remain mindful of potential headwinds after the inauguration. The Bank of Japan (BoJ) is expected to announce a rate hike on January 24th, which could cause some market turbulence. While we don’t anticipate the same level of market disruption as we saw last August with the Yen carry trade unwind, caution is advised during this period, especially considering the 90% probability of the rate hike.

Meanwhile, the probability of the U.S. holding Bitcoin as part of its strategic reserve has risen to 50% on Polymarket for the first time. We anticipate an official announcement within the next 90 days, with the possibility of it occurring within the next 30 days.

On the broader equity front, stock futures were largely flat on Thursday following Wall Street's best performance since November, spurred by a tame inflation report and strong bank earnings. The 10-year Treasury yield also saw a sharp pullback from a 14-month high earlier in the week.

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The News Room

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Bitcoin Correlation with Nasdaq Soars Amid CPI Fears

Bitfinex’s head of derivatives, Jag Kooner, noted that Bitcoin’s growing correlation with top technology stocks—now at a two-year high with the Nasdaq 100—makes it increasingly sensitive to economic factors such as the upcoming US CPI report. This heightened correlation suggests Bitcoin is behaving more like a traditional risk asset, reacting strongly to broader market volatility driven by inflation concerns and Federal Reserve policy signals. Kooner warned that higher-than-expected inflation could trigger equity volatility that might drag Bitcoin lower, while a positive market reaction could bolster its price. Analysts, including Bitget’s Ryan Lee, attribute recent Bitcoin dips below $92,500 to fears of tighter US monetary policy, indicating that crypto prices are now more quickly responsive to macroeconomic changes and interest rate expectations than traditional assets.

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Decentralized Platforms May Benefit from Stringent US Crypto Tax Laws

Upcoming stringent IRS reporting requirements on cryptocurrency transactions by centralized exchanges may inadvertently drive users toward decentralized platforms, according to industry experts. Starting in 2025, CEXs and brokers will report digital asset sales and exchanges to help ensure tax compliance, but some investors view this as overreach. Anndy Lian and others warn that such measures could push users to decentralized exchanges like Uniswap or PancakeSwap, where tax enforcement is currently challenging. This potential shift has sparked backlash from the crypto community, with the Blockchain Association filing a lawsuit against the IRS over concerns that the regulations improperly extend broker definitions to decentralized exchanges.

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Nomura-backed Komainu Raises $75M in Bitcoin to Fuel Global Expansion

Komainu Holdings, a regulated crypto custodian backed by Nomura’s Laser Digital, secured $75 million in Bitcoin funding from Blockstream Capital Partners—pending regulatory approval—to drive global expansion, integrate advanced crypto technology, and establish a Bitcoin treasury for risk management. The investment will support adopting Blockstream’s collateral management and tokenization solutions, including the Liquid Network and asset management platform to reduce settlement times and automate tokenized asset support. Blockstream CEO Adam Back and other executives will join Komainu’s board, reinforcing the partnership as Komainu targets markets in Singapore, Japan, the US, and Switzerland to expand its compliant digital asset services to institutional clients.

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Disclaimer

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This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.

Unless otherwise provided in a separate agreement, Secure Digital Markets does not represent that the report contents meet all of the presentation and/or disclosure standards applicable in the jurisdiction the recipient is located. Secure Digital Markets and their officers, directors and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses, or opinions within the report.

Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.

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