Crypto Daybook Americas: Inflation Worry Crushes Bitcoin Bulls Ahead of FOMC

By Omkar Godbole (All times ET unless indicated otherwise)

Just a day ago, I highlighted that the bias for protective puts in the S&P 500 options market are painting a cautious picture for risk assets. Fast forward to today, the tide has turned and risk assets, including BTC, are on the defensive.

The change in sentiment is more noticeable in the altcoin sector, where ETH, ADA and DeFi coins have taken a bigger hit than BTC’s 5% loss in 24 hours. Expectations for the “alt season” were riding high following altcoin leader ether’s impressive relative to bitcoin since Dec. 20.

That excitement is fading fast and here is where it gets interesting: The ETH/BTC forward term structure, calculated as the ratio between prices for ether futures and bitcoin futures over different maturities, has slipped into backwardation, according to data tracked by crypto financial platform BloFin.

It means that some of the sharpest minds in the derivatives market are anticipating that ETH and other altcoins will underperform in the coming months. So much for the much-anticipated altcoin dream.

While the current degree of backwardation is better than what we saw before the election, it still leaves investors feeling uncertain. BloFin Academy put it best: “it merely suggests that the situation may not get worse.”

Speaking of interest rates, traders are now eyeing a less-than-50% probability of a Fed rate cut in March, which doesn’t offer much comfort. The next rate cut is not seen happening before June, the CME’s FedWatch tool shows.

This is particularly bearish for ETH, often touted as an internet bond, offering a fixed-income like yield through staking rewards. It’s no surprise that a major momentum study called the “Guppy multiple moving average indicator” is about to flip bearish for ETH. (check the TA section).

All of this is unfolding against the backdrop of renewed concerns about U.S. inflation, which is causing rates volatility to creep back into the picture. Data released on Wednesday showed that growth at U.S. services providers picked up in December, with prices jumping to the highest levels since 2023.

Wednesday’s release of the minutes from the December meeting, which indicated fewer expected rate cuts, could add to the risk-off sentiment and support dollar strength. Additionally, we may see some reactions to the ADP payrolls report, although this data often doesn’t align perfectly with the official payroll figures due on Friday.

Don’t forget to mark your calendars. There’s also a scheduled speech by Fed’s Chris Waller. It will be interesting to see if he echoes the concerns of his colleagues regarding the risk of rising inflation. Stay alert!

What to Watch

Crypto

Jan. 8: Bybit terminates withdrawal and custody services to nationals or residents of the French Territories.

Jan. 8: Xterio (XTER) to create and distribute new tokens in token generation event.

Jan. 9, 1:00 a.m.: Cronos (CRO) zkEVM mainnet upgrades to ZKsync’s latest release.

Jan. 12, 10:30 p.m.: Binance will halt Fantom token (FTM) deposits and withdrawals and delist all FTM trading pairs. FTM tokens will be swapped for S tokens at a 1:1 ratio.

Jan. 15: Derive (DRV) token generation event.

Jan. 15: Mintlayer version 1.0.0 release. The mainnet upgrade introduces atomic swaps, enabling native BTC cross-chain swaps.

Jan. 16, 3:00 a.m.: Trading for the Sonic token (S) is set to start on Binance, featuring pairs like S/USDT, S/BTC, and S/BNB.

Macro

Jan. 8, 8:30 a.m.: Fed Governor Christopher J. Waller is giving a speech, “Economic Outlook,” at the Lectures of the Governor Event, in Paris, France. Livestream link.

Jan. 8, 2:00 p.m.: The Fed releases the minutes of the Dec. 17-18 Federal Open Market Committee (FOMC) meeting.

Jan. 9, 8:30 a.m.: The U.S. Department of Labor releases the Unemployment Insurance Weekly Claims Report for the week ended Jan. 4. Initial Jobless Claims Est. 210K vs. Prev. 211K.

Jan. 10, 8:30 a.m.: The U.S. Bureau of Labor Statistics (BLS) releases December 2024’s Employment Situation Summary report.

Nonfarm payrolls Est. 160K vs. Prev. 227K.

Unemployment rate Est. 4.2% vs Prev. 4.2%.

Jan. 10, 10:00 a.m.: The University of Michigan releases January’s Michigan Consumer Sentiment (Preliminary). Est. 74.5 vs. Prev. 74.0.

Token Events

Governance votes & calls

No major events scheduled.

Unlocks

Jan. 8: Flare to unlock 1.61% of its circulating supply, worth $43.78 million.

Jan. 8: Optimism to unlock 0.33% of its OP circulating supply, worth $8.1 million.

Jan. 11: Aptos to unlock 1.13% of its APT circulating supply, worth $104.73 million.

Jan. 12: Axie Infinity to unlock 1.45% of its circulating supply, worth $14.08 million.

Token Launches

Jan. 10: Lava Network (LAVA) to be listed on KuCoin and Bybit at 5 a.m.

Jan. 10: Bybit to delist FTM (FTM) at 5 a.m..

Conferences:

Day 3 of 14: Starknet, an Ethereum layer 2, is holding its Winter Hackathon (online).

Jan. 13-24: Swiss WEB3FEST Winter Edition 2025 (Zug, Zurich, St. Moritz, Davos)

Jan. 17: Unchained: Blockchain Business Forum 2025 (Los Angeles)

Jan. 18: BitcoinDay (Naples, Florida)

Jan. 20-24: World Economic Forum Annual Meeting (Davos-Klosters, Switzerland)

Jan. 21: Frankfurt Tokenization Conference 2025

Jan. 25-26: Catstanbul 2025 (Istanbul). The first community conference for Jupiter, a decentralized exchange (DEX) aggregator built on Solana.

Jan 30-31: Plan B Forum (San Salvador, El Salvador)

Feb. 3: Digital Assets Forum (London)

Feb. 18-20: Consensus Hong Kong

Token Talk

By Shaurya Malwa

Crypto gaming projects are onboarding AI Agents amid the hype.

Illuvium, an Ethereum-based gaming franchise, on Tuesday said it was integrating Virtuals Protocol’s AI technology to enhance the in-game actions of non-playable characters (NPCs) across its three games: Overworld, Arena, and Zero.

Virtuals, known for its popular AI agent AiXBT, employs the G.A.M.E framework to create more dynamic and interactive NPCs, improving questing, storytelling, and player-NPC relationships.

The relatively new “AI Agents” sector has become crypto’s hottest in the past few months, beating gains in bitcoin, memecoins and decentralized finance tokens in December.

Virtuals Protocol is the largest AI Agent creation tool by market capitalization. It allows anyone to create and program their own AI agent and float a token attached to it in the open market.

Crypto and blockchain-based games have long been considered possible growth sectors but have never really taken off in a feasible way. However, AI proponents believe the technology can create more dynamic, engaging games with smarter NPCs, improve player retention and even manage in-game assets or strategies to offer passive income to players and holders.

Could that path lead to an increase in adoption and valuations of gaming tokens? The coming months will tell.

Derivatives Positioning

Most large-cap tokens, excluding BTC and BCH, have experienced a decline in futures open interest alongside their spot prices. This suggests that the price drop was led by unwinding of longs and not necessarily fresh shorts.

The annualized one-month basis in ETH CME futures has dropped to a two-month low of 8.22%. BTC’s basis has dropped to 6.79%, denting the appeal of cash and carry trades.

Front-end BTC and ETH options skews show a decline in call bias, suggesting that short-term bullish sentiment is diminishing. Options expiring in February and beyond maintain a bullish bias.

Options flows, however, have been mixed for BTC, with demand for downside protection in ETH.

Market Movements:

BTC is down 1.9% from 4 p.m. ET Tuesday to $94,688.17 (24hrs: -5.83%)

ETH is down 1.96% at $3,327.97 (24hrs: -8.57%)

CoinDesk 20 is down 0.79% to 3,442.47 (24hrs: -7.1%)

Ether staking yield is down 6 bps to 3.14%

BTC funding rate is at 0.03% (10.95% annualized) on Binance

DXY is up 0.34% at 108.91

Gold is up 0.41% at $2667.5/oz

Silver is up 1.25% to $30.83/oz

Nikkei 225 closed -0.26% at 39,981.06

Hang Seng closed -0.86% at 19,279.84

FTSE is up 0.22% at 8,263.76

Euro Stoxx 50 is up 0.36% at 5,029.83

DJIA closed -0.42% to 42,528.36

S&P 500 closed -1.11% at 5,909.03

Nasdaq closed -1.89% at 19,489.68

S&P/TSX Composite Index closed +0.18% at 25,635.73

S&P 40 Latin America closed -0.28%% at 24,929.9

U.S. 10-year Treasury is unchanged at 4.69%

E-mini S&P 500 futures are up 0.33% to 5,973.75

E-mini Nasdaq-100 futures are up 0.37% to 21,438.25

E-mini Dow Jones Industrial Average Index futures are up 0.31% at 42,936.00

Bitcoin Stats:

BTC Dominance: 57.95

Ethereum to bitcoin ratio: 0.035

Hashrate (seven-day moving average): 796 EH/s

Hashprice (spot): $58.2

Total Fees: 7.3 BTC/ $724,162

CME Futures Open Interest:

BTC priced in gold: 36.0 0z

BTC vs gold market cap: 10.24%

Basket Performance

Technical Analysis

The chart shows ether’s price and the guppy multiple moving averages (GMMA) indicator, which combines two groups of moving averages (MAs) with different periods to gauge trend strength and changes.

The green band, representing short-term MAs, is about to cross below the red band of long-term MAs, confirming a bearish shift in momentum.

Crypto Equities

MicroStrategy (MSTR): closed on Tuesday at $341.43 (-9.93%), down 0.77% at $338.61 in pre-market.

Coinbase Global (COIN): closed at $264.33 (-8.14%), up 0.25% at $264.98 in pre-market.

Galaxy Digital Holdings (GLXY): closed at C$28.25 (-5.3%).

MARA Holdings (MARA): closed at $19.07 (-7.2%), down 1.26% at $18.83 in pre-market.

Riot Platforms (RIOT): closed at $12.41 (-3.72%), down 1.05% at $12.28 in pre-market.

Core Scientific (CORZ): closed at $14.12 (-6.61%), up 0.85% at $14.24 in pre-market.

CleanSpark (CLSK): closed at $10.71 (-6.3%), down 0.75% at $10.63 in pre-market.

CoinShares Valkyrie Bitcoin Miners ETF (WGMI): closed at $24.35 (-6.88%).

Semler Scientific (SMLR): closed at $55.24 (-6.28%).

Exodus Movement (EXOD): closed at $39.31 (-0.98%).

ETF Flows

Spot BTC ETFs:

Daily net flow: $52.4 million

Cumulative net flows: $36.94 billion

Total BTC holdings ~ 1.138 million.

Spot ETH ETFs

Daily net flow: -$86.8 million

Cumulative net flows: $2.68 billion

Total ETH holdings ~ 3.653 million.

Source: Farside Investors, as of Jan. 8.

Overnight Flows

Chart of the Day

Google Trends, used to measure retail interest in popular topics, currently reports a value of under 50 for the U.S.-wide search for ‘Bitcoin’ during the past 12 months.

The sharp decline from the peak of value of 100 seen in November indicates the euphoria has fizzled out, leaving the market in a much healthier state.

While You Were Sleeping

Bitcoin Investor Ordered bo Hand Over Crypto Keys in Landmark Tax Case (Cointelegraph): A U.S. federal judge ordered a Bitcoin investor (as well as related parties), who was sentenced to two years in December for tax evasion, to surrender hardware wallets and passwords to crypto funds for $1.1M restitution.

Dogecoin Slumps 10% Amid Bitcoin’s Slide to $96K, $560M Long Positions Liquidated (CoinDesk): A stronger-than-expected ISM report and the rising U.S. job openings has pushed Treasury yields to their highest since May. This had led to declines in cryptocurrency prices with DOGE leadings the losses among the majors.

Key Market Dynamic That Greased Bitcoin and SPX Rally After U.S. Election is Shifting (CoinDesk): The MOVE index, which measures Treasury volatility, is rising, signaling tighter financial conditions. After bottoming in mid-December and supporting rallies in crypto and stocks, its rebound aligns with bitcoin’s drop and the S&P 500’s fading momentum.

China Boosts FX Support as Yuan Heads Toward Policy Red Line (Bloomberg): On Wednesday, China’s central bank set a stronger exchange rate against the U.S. dollar and reduced offshore yuan supply. This raises borrowing costs, making it harder for traders to fund crypto investments.

Trump Imagines New Sphere of U.S. Influence Stretching From Panama to Greenland (The Wall Street Journal): On Tuesday, President-elect Donald Trump proposed annexing Canada, retaking control of the Panama Canal, and acquiring Greenland through economic or military means, alarming allies and signaling a shift in U.S. foreign policy priorities.

Bitcoin Faces Short-Term Pressure Amid Macro and Sentiment Shifts (Decrypt): Bitcoin, recently at $108,000, is under pressure, with analysts pointing to the decline on a surging U.S. dollar, hawkish Fed comments, rising market volatility, cautious trader sentiment, global liquidity constraints, and U.S. debt ceiling concerns.