With the steady inflow of spot ETF funds, Bitcoin has finally returned to $100,000 and briefly broke through $106,000 earlier today, setting a new high. Meanwhile, Ethereum has also risen above $4,000. However, the overall market increase is not significant compared to DeFi tokens. Currently, funds are gradually shifting from main chain coins to DeFi-related tokens, and the theme of regulatory relaxation is rapidly brewing for a rise.
ETF spot inflows remain the main driving force pushing Bitcoin prices up. Last week, except for Friday's trading day, there were four consecutive days of net inflows exceeding $200 million, demonstrating that Wall Street fund companies continue to buy Bitcoin in response to Trump's crypto-friendly policies. Additionally, the latest November Consumer Price Index remains at an annual increase of 2.7%, indicating that the overall environment is not problematic. The next stage may need to pay attention to the upcoming U.S. GDP forecast.
It is noteworthy that this trend may continue even after Trump takes office, as many hedge funds previously resisted buying Bitcoin. However, this sentiment is slowly changing, and the overall bullish atmosphere is likely to persist. For example, BlackRock publicly advised investors to allocate 2% of their multi-asset portfolio to Bitcoin, indicating that IBIT has been quite profitable for the company and the market response has been enthusiastic.
Next, more fund companies are deciding to enter the Bitcoin ETF distribution and asset custody field. We have also seen more investment institutions show interest in Bitcoin. The U.S. Bitcoin ETF has been launched for nearly a year and has accumulated over $50.5 billion in fund inflows. On the other hand, companies continue to buy Bitcoin as a value investment tool, with the most well-known being MicroStrategy, which this week purchased another 21,550 BTC at an average price of $98,782, bringing its total holdings to 423,650 BTC.
We expect that Bitcoin spot ETFs will continue to maintain net fund inflows in the future. There is no need to worry about fund purchases from Wall Street, but the cryptocurrency trading market appears to be more vibrant now. Funds have quickly overflowed into main chain coins, small and medium cryptocurrencies, and DeFi tokens. Next, let's talk about the overflow trend of DeFi tokens.
A. On December 10, Binance CEO CZ: China may establish a Bitcoin reserve.
Former Binance CEO Zhao Changpeng (CZ) stated on December 9 at the Bitcoin MENA conference in Abu Dhabi that he believes China may become one of the countries adopting a strategic Bitcoin reserve, potentially following the plan proposed by the incoming Trump administration. However, he believes that 'smaller countries' may adopt Bitcoin reserves first, and this change may occur slowly.
However, he also mentioned that due to the lack of transparency from the Chinese government, its stance on cryptocurrencies is harder to predict. Trump has not yet taken office, and the strategic Bitcoin reserve plan has not yet been initiated. If this does happen, we can observe the reactions of other countries, meaning that when the U.S. truly starts to establish a Bitcoin reserve, it may trigger other countries to follow suit.
He also added that there are currently no signs of the Chinese government hoarding Bitcoin, but he believes that establishing a strategic reserve is 'inevitable.' However, he thinks that the Chinese government will first hoard Bitcoin and then announce its strategic plan, rather than announcing the policy in advance. CZ believes they will have to do this at some point because Bitcoin is the only 'hard asset.'
B. On December 11, U.S. SEC commissioners called for the government to reshape the regulatory environment for the crypto industry.
U.S. SEC Commissioner Hester Peirce, in an interview with Fox Business, outlined three priorities aimed at addressing regulatory obstacles in the development of the crypto industry. She first called for the termination of the controversial 'Chokepoint 2.0' initiative, which restricts the crypto industry from accessing banking and financial services, such as allowing banks to provide custodial services to crypto exchanges or DeFi companies, enabling the smooth development of the crypto industry.
Next, she emphasized the need to clarify the SEC's regulatory scope and resolve disputes over which cryptocurrencies fall under securities. This will help ensure that assets not classified as securities are protected from unnecessary regulation, which will also promote more cryptocurrencies to convert into spot ETFs for trading. Finally, she called for regulatory agencies to collaborate with crypto companies to openly discuss how existing rules apply and where adjustments are needed to promote transparency and rapid progress.
It can be seen that the U.S. is promoting the normalization of crypto industry regulation. In the past, many banks did not allow providing financial services to crypto companies. In the future, as U.S. regulations loosen, more banks will engage with crypto companies to provide fiat currency custody, transfers, and financing services. Stablecoin-related companies are likely to benefit from a more relaxed regulatory environment, with the first beneficiaries being PayPal, Paxos, and USDC.
C. On December 12, Ray Dalio called on investors to abandon debt assets and invest in Bitcoin.
Ray Dalio, founder of Bridgewater Associates, shared his current investment strategy at the Abu Dhabi Financial Week. He advocates that investors should abandon traditional debt assets and shift their funds towards hard assets like gold and Bitcoin. The main reason is that the global economy is facing unprecedented debt crises, with debt levels in major economies, including the U.S. and China, skyrocketing to unprecedented heights, and there is a risk of default looming soon.
In the future, only 'debt, currency, economy, and technological innovation' will be the key driving forces for world development, rather than investing in debt assets. He emphasized that he wants to move away from debt assets like bonds and instead hold hard currencies like gold and Bitcoin. Unlike a few years ago when he criticized Bitcoin, Dalio has now become a supporter, especially as Bitcoin first broke through $100,000.
He advised investors not to overly focus on the daily ups and downs of the news, but to think strategically from a global perspective. In the future, governments worldwide will continuously ease policies for economic development, and the value of debt assets will only decrease with inflation. Furthermore, governments also carry the risk of technical defaults. In contrast, companies capable of generating cash flow and technological innovation, as well as the limited quantity of Bitcoin, are better investment targets.
Expectations for a relaxed regulatory environment are shifting funds towards DeFi.
The biggest recent news has been that World Liberty Financial (WLFI), under Trump, has begun injecting funds into DeFi projects. WLFI was established in September this year, with a business model of providing lending and interest income services for crypto assets. However, after Tron founder Justin Sun announced an investment of $30 million in WLFI on November 25, becoming the largest investor and joining WLFI's advisory team, the project quickly transformed into a more aggressive investment company.
Recently, WLFI purchased various cryptocurrencies with $12 million in USDC, including $10 million worth of Ethereum (ETH), $1 million of Chainlink (LINK), and $1 million of Aave (AAVE), prompting market investors to rush after previously undervalued DeFi tokens. Although the amount is not large compared to other investment institutions that often invest tens of millions, the fact that this is a DeFi project led by the Trump family undoubtedly sends a strong message to the market - 'DeFi regulation may be significantly relaxed.'
WLFI previously announced a partnership with Chainlink, stating that it will adopt its price oracle and cross-chain technology, while choosing to establish a lending DeFi protocol on the Aave v3 main chain. Although the investment amount is not large, the support from Trump has caused both tokens to soar over 50%, and it is anticipated that funds will rotate back from Bitcoin to DeFi tokens.
Taking LINK as an example, according to Santiment analysis, the price increase of LINK is primarily attributed to whales significantly increasing their holdings. In the past two months, wallets holding more than 100,000 LINK have increased by 5.69 million, while wallets holding less than 100,000 have decreased by 5.67 million. Such patterns usually indicate potential future price growth and show that major investors have already completed their layout, just waiting for the WLFI news to trigger a rise.
In addition to investment news, market analysts are looking forward to further loosening of SEC regulations on DeFi-related companies, allowing these companies to access banking services. SEC commissioners have already voiced this, hoping to assist crypto companies in obtaining U.S. banking financial services, including account custody, transfers, and related financial businesses, indicating that DeFi companies will have more space for innovation under Trump's new policies.
The market is focusing on positive news and policies, redeploying funds into DeFi tokens. For example, decentralized trading protocols like Uniswap and SUI have seen remarkable increases. However, we believe that crypto is just starting to enter DeFi. If the broader market does not decline, there is a great opportunity for DeFi tokens to outperform the market. Currently, this is just the beginning of the upward trend for DeFi, which warrants investors' continued attention and expectation.
