Crypto markets became bipolar after the last FOMC meeting

Last week, the digital asset market experienced an unexpected surge, with Bitcoin (BTC) leading the way with an impressive 12% daily gain on Tuesday. This was the first time that BTC had increased by double digits in a day since September 2022.

What’s more strange is that last week was an objectively bearish week, with the release of the January inflation reading (CPI) coming in a little steamier than analysts expected, sending risk assets lower across the board. Still, BTC bounced back quickly to most people’s surprise.

This is an interesting behavior that it shows some potential decoupling of financial conditions for crypto from monetary policy, and suggests a certain bipolarity in the current market.

h2 Crypto Lens: Layer 2 solutions and virtual machines/t2

The STX token and the Filecoin token, FIL, have experienced a surge in value, as the arrival of the Ordinals protocol and the launch of the Filecoin Virtual Machine (FVM) have investors taking notice.

The Ordinals protocol has introduced a new narrative of non-fungible tokens (NFT) and smart contracts on the Bitcoin blockchain, while FVM will enable developers to design decentralized applications on the Filecoin network.

This news has fueled a wave of interest in these two symbols, as investors look to capitalize on the new opportunities they present.

h2 Industry Shakers/t2

• Hong Kong Proposes Rules for Crypto Trading Platforms

On Monday, Hong Kong proposed rules that would allow retail investors to trade certain “large-cap tokens” on licensed exchanges, in stark contrast to the crypto-related transaction ban in mainland China. This more relaxed regulatory environment for cryptocurrencies is likely to create an opportunity for exiled Chinese-founded Web3 companies to return closer to home. And as the US government continues to implement regulations for the crypto industry, Hong Kong may emerge as a new hub for the virtual asset industry.

• Many existing Stablecoins will not meet upcoming global standards: FSB

Stablecoins have been under heavy scrutiny for the past month, with the SEC issuing a Wells Notice to Paxos, the issuer of the BUSD stablecoin. In recent developments, the Financial Stability Board (FSB) – through its chairman Klaas Knot – said that most of the existing stablecoins are unlikely to meet the upcoming global standards. These recommendations will focus on strengthening the governance framework, redemption rights and stabilization mechanisms for stablecoins.

• Bank of Japan to trial digital yen in April

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The Bank of Japan (BOJ) has announced that it will launch a pilot program in April to explore the possibility of issuing a digital currency, the “digital yen”. This is more than two years since the BOJ first began investigating this area with its proof of concept central bank digital currency (CBDC) experiment in October 2020. The pilot program will be used to develop a system for testing, which will consist of a central system, intermediate network systems, intermediate systems and endpoint devices all connected in one structure.

• SEC cracks down on Do Kwon and Terraform Labs

Last week, the US Securities and Exchange Commission (SEC) filed a complaint against Terraform Labs, a Singapore-based crypto company, and its CEO Do Kwon, in the US District Court for the Southern District of New York. The SEC alleged that the defendants committed multi-billion dollar securities fraud. They were accused of violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act. The charges come nearly a year after the fall of Terra Luna, which was a $60 billion ecosystem at the time of its collapse.

Written by:
Ulrik Lykke