Trakx Weekly Update:Crypto Hit by Rising US Political Risk

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset prices ended last week in a funk, as highlighted by the 9% drop in the value of our benchmark large cap Top10 Crypto CTI, as rising worries about a potential partial US government shutdown undermined investor sentiment. Such was the breadth of the sell-off that only one of our CTIs finished in the green, the Digital Inflation Hedge, which gained just under 3% over the preceding seven day period. Within the sea of red, the worst performers were the NFT Metaverse CTI and the Cardano Ecosystem CTIs, both having lost almost 12%.

US Government Shutdown Fears Return

The prospect of a partial US government shutdown increased sharply over the weekend after leader of the Senate Democrats, Chuck Schumer, said his caucus will block a major spending package unless the Department of Homeland Security had its funding removed. The announcement follows the second fatal shooting in Minneapolis by federal immigration agents in less than a month. With Congress struggling to agree on budgetary priorities and temporary funding measures set to expire, the probability of a partial government shutdown has increased to 75% according to the online betting platform Polymarket. Coming just month’s after the longest government shutdown in US history, this latest development underlines deepening political dysfunction in Washington, which weighted on investor confidence and amplified market volatility.

Greenland Resolution

President Trump’s hardball negotiating style—this time featuring veiled threats of military action to secure Greenland, alongside the use of trade tariffs—appears, once again, to have delivered results. On the sidelines of the World Economic Forum in Davos, Trump announced that he had reached an agreement with NATO Secretary General Mark Rutte regarding Greenland.

According to media reports, the deal amounts to a “framework for a future agreement” focused on military and mineral development cooperation. Under the proposal, the US would be granted sovereignty over territories hosting military bases. Markets, both traditional and digital, welcomed the apparent de-escalation in geopolitical tensions, as well as confirmation that proposed US tariffs on eight European countries would be rescinded. However, the rally proved short-lived. Neither Denmark nor Greenland participated in the negotiations, and both have repeatedly stated that sovereignty is non-negotiable. As a result, it remains unclear whether the proposal will ultimately be ratified – lingering uncertainty that tempered what might otherwise have been a more bullish market response.

Davos Debate

As the world’s political and financial elite descended on Davos, much of the attention centered on Trump and his ongoing dispute with European leaders over Greenland (see above). But this was far from the only flashpoint. During a panel discussion on tokenization, tensions flared in what could generously be described as a “heated exchange” between Banque de France Governor François Villeroy de Galhau and Coinbase CEO Brian Armstrong. The initial disagreement focused on whether stablecoin issuers should be permitted to pay interest to holders. Villeroy de Galhau argued that the current prohibition is appropriate, warning that interest-bearing stablecoins risked disintermediating the traditional banking system and undermining financial stability. Armstrong countered that such restrictions harm competitiveness, particularly as other jurisdictions already allow stablecoin issuers to pay interest.

The debate became even more strained when the conversation turned to Bitcoin. The governor stated that he places far greater trust in “central banks with a democratic mandate” than in the “private issuers of Bitcoin.” Armstrong swiftly dismantled this claim by pointing out that Bitcoin, as a decentralized protocol, has no issuer. Given Bitcoin was launched 17 years ago and has grown into a $1.8 trillion asset, it is more than a little disappointing to hear such a fundamental misunderstanding from someone who should know more than a thing or two about money.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin slides near $87,000 as US government shutdown fears weigh on crypto: The Block
• Bitcoin and ether fall, then rebound as Trump retreats from Greenland tariffs: CoinDesk
• Brian Armstrong defends Bitcoin in tiff with French central banker: DLNews
• Coinbase Creates Advisory Board to Study Quantum Computing Risks to Bitcoin: Decrypt
• Buterin calls 2026 the year to reclaim self-sovereign computing: Cointelegraph
• Trump sues Jamie Dimon, revives ‘Operation Chokepoint 2.0’: Protos

Trakx News

• We are proud to announce that Trakx has officially joined the Canton Network as a node operator. This milestone marks a decisive step forward in our mission to democratize access to advanced crypto index strategies by issuing our Crypto Tradable Indices (CTI) as on-chain tokens within an institutional-grade blockchain ecosystem.

Trakx CTIs Performance

Sources: Coingecko and AlphaVantage

*Return of bitcoin is calculated since 01/05/2020, while CTIs performances were calculated since their respective launch date.
**Includes simulated performance.
***The risk signal is determined according to the historical volatility level, the higher the riskier.

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Disclaimers: No Investment Advice. Index returns and statistics are for illustration only. Index returns do not reflect any transaction costs or expenses. Past performance does not guarantee future results. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the newsletter content as such. Trakx.io does not recommend that any cryptocurrency should be bought, sold, or held by you. Readers shall conduct their own due diligence and consult their financial advisors before making any investment decisions.