KEY TAKEAWAYS
- No rate cut expected this week as growth stays strong amid shutdown risk
- ETF outflows persist, trends remain bearish, and BTC’s breakout attempt is deferred
- Winter storms cut BTC hash rate, with normalization expected as conditions improve
DIGITAL ASSET COMMENTARY
Markets head into the week with the Federal Reserve firmly on hold, with odds of a rate cut at Wednesday’s FOMC meeting effectively zero. Chair Jerome Powell is likely to face questions around Fed independence, but with unemployment holding below 4.6%, the Fed remains anchored to labor market conditions and unlikely to adjust policy in the near term. Inflation continues to trend benignly, with Truflation at 1.2%, while growth data remains strong as GDP estimates point to a robust 5.4% print. Political risk is rising as the probability of a government shutdown by month-end increases, while near-term volatility is amplified by earnings from several Mag7 names, including Microsoft, Meta, Tesla, and Apple.
Despite precious metals pushing to fresh all-time highs, digital asset markets remain under pressure. US spot BTC and ETH ETFs saw net weekly outflows of approximately $1.32B and $600M, respectively, with trend indicators still firmly bearish. A potential BTC breakout from $93k toward $103k has been deferred following last week’s downside volatility tied to geopolitical uncertainty around Greenland. Sunday selling has dominated volumes over the past month, suggesting systematic de-risking ahead of the week. The positive catalyst backdrop also remains thin with the US Senate’s crypto market structure markup rescheduled to January 29 and vulnerable to further delay if a shutdown materializes. Historically, Bitcoin bear markets have lasted roughly a year or more, pointing to a potential cyclical bottom closer to Q4.
On the network side, BTC hash rate has declined roughly 36% over the past several days, largely driven by severe winter storms impacting large portions of the US mining corridor. Miners have curtailed operations amid higher power costs and grid constraints, though much of the hash rate should return as conditions normalize. The upcoming difficulty adjustment is tracking toward a ~17% reduction, with block times briefly approaching 15 minutes, a multi-year high, reflecting a temporary weather-driven dislocation.
For educational purposes only. Past performance is not indicative of future results. Investments may be speculative, illiquid and there is a total risk of loss of principal. There is no guarantee that any specific outcome will be achieved.
