Trakx Weekly Update: Digital asset dip on Fed caution

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset prices extended their recent volatility last week, with our benchmark Top 10 Crypto CTI falling just over 5%. The pull-back was broad-based, with every one of our crypto indices recording losses over the seven-day period. The least affected — and top performer for the week — was the Bitcoin Control 15 CTI, a volatility-targeting product. At the other end of the spectrum, the Gaming CTI was the worst performer, dropping slightly more than 9%.

Fed Caution

As widely expected, the Federal Reserve cut its target range for the Fed Funds rate by 25bp, bringing it to 3.75–4.00%. Like the prior meeting, while most members of the FOMC supported the move, it was not unanimous: one dissenter favoured a deeper 50bp cut, while another preferred no change at all. This division highlights the Fed’s dilemma — easing monetary policy even as inflation remains above its 2% target. Chair Powell’s cautious remarks during the post-meeting press conference, suggesting that a December rate cut (currently priced in with 66% probability) is not guaranteed, dampened risk appetite and weighed on digital asset demand. Even the announcement that quantitative tightening will end on December 1 failed to spark investor enthusiasm.

US-China Trade Tensions Ease

In a positive development, last week Presidents Trump and Xi met face-to-face in South Korea to advance negotiations aimed at avoiding a renewed trade war. On his return to Washington, President Trump announced that, in response to China extending its rare earth export ban by one year, the US would remove the proposed 100% tariff and reduce existing tariffs—originally imposed to pressure China over fentanyl precursor exports—by 10 percentage points. While clearly constructive, news of the agreement provided only a modest boost to digital asset prices, indicative of the circumspect mood amongst digital asset investors lately.

Bitcoin Soft Fork Proposal

As mentioned in the October monthly update, the Bitcoin community is facing another internal debate — this time concerning the Core v30 update, which removed the data limit on OP_RETURN transactions. Critics argue that by allowing arbitrary data to be stored within Bitcoin transactions, nodes running the latest Core version could potentially host illegal content, exposing operators to legal risk. To address this, BIP-444 has been proposed. It would cap OP_RETURN outputs at 83 bytes and scriptPubKeys outputs at 34 bytes, restricting the volume of arbitrary data stored on-chain. However, adopting BIP-444 would render some prior transactions invalid, creating a temporary soft fork to allow developers time to build a longer-term fix. The proposal has support from notable developers such as Luke Dashjr, but many others oppose it, arguing it would disrupt the network and amount to censorship — conflicting with Bitcoin’s open, permissionless, and decentralized ethos.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin price dips as December Fed interest rate cut ‘not guaranteed’: YahooFinance
• BTC Drops, Then Pops, as Trump Lowers China Tariffs: CoinDesk
• Bitcoin proposal to curb spam with a temporary soft fork sparks debate among developers: TheBlock
• Ethereum Set to Debut ‘Key to Layer-2 Scaling’ as Fusaka Upgrade Clears Final Test: Decrypt
• Is the EU Bitcoin race starting? France targets 420k BTC as Germany weighs reserves: CryptoSlate
• CZ threatens Elizabeth Warren with lawsuit over ‘money launderer’ claim: Protos

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.