Trakx Weekly Update: Waiting On The Fed

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset prices were flattish over the past week, as highlighted by the -0.4% change in our flagship large-cap Top10 Crypto CTI. The best performer over the prior seven days was the Bitcoin–Ether equally weighted CTI, which managed to eke out a 1% gain. At the other end of the return spectrum, our AI and AI Agents CTIs gave up the most ground, with both indices dropping by around 9%.

Powell’s Replacement

Last week President Trump announced he will nominate a new chair of the Fed to replace Jerome Powell early in the new year. While he did not give an indication as to who his eventual pick would be, the front runner according to Polymarket is Kevin Hassett, the current National Economic Council director. Given Hassett previously worked as an advisor to Coinbase, his potential appointment is viewed favourably by crypto investors. Moreover, he is widely seen as supporting Trump’s preference for the Fed to adopt an easier monetary policy stance. Some investors have questioned whether he has sufficient credibility to convince his FOMC colleagues of the need for lower interest rates. However, he can likely rely on the support of another recent Trump nomination to the Fed, Stephen Miran, the president’s former economic advisor and another known dove, as well as two other Trump hires from his first term in office. As such, Trump appointees hold a 5–2 majority on the board, and given this composition, many crypto investors believe it won’t be long before the Fed shifts to balance sheet expansion, now that the QT programme officially ended last week. More immediately, though, investors have to navigate this week’s FOMC meeting, where the probability of a 25bp cut is priced at 87%.

Vanguard Relents

During last year’s rush by tradfi firms to list their spot crypto ETFs, one firm stood out—Vanguard, the world’s second-largest asset manager after BlackRock, with over $8 trillion in AUM. Speaking at the time, CEO Tim Buckley said the company had no plans to list such products because it “did not believe a bitcoin ETF belongs in a long-term portfolio of someone saving for their retirement. It is a speculative asset.” However, amid persistent demand and under the stewardship of a new CEO, Salim Ramji, a former BlackRock executive, the company has had a change of heart and is now prepared to support crypto-focused ETFs on its platform that hold Bitcoin, Ether, XRP, Solana, and other regulated cryptocurrencies. The firm will not, however, be launching its own crypto ETFs, nor will it support funds linked to meme coins as defined by the SEC.

Ethereum Fusaka Upgrade

Last Thursday the Fusaka upgrade activated on the Ethereum Mainnet at block height 18,200,000. Following the second major network upgrade this year, the amount of data (so-called blobs) that layer 2 blockchains can send to the base layer will increase. Prior to the upgrade, the maximum number of data blobs that could be sent to layer 1 was 9, but following the Fusaka upgrade this limit will increase by 8X—not immediately, but through a series of upgrades. The first will take place this week, raising the limit to 15, before rising to 21 in early January when the next upgrade is released. ETH developers hope that by expanding capacity, layer 1 will be better positioned to capture value from layer 2 blockchains, which have been cannibalizing revenues over the last year or so. The successful activation certainly provided additional support for the price of the second-largest cryptocurrency by market cap, as evidenced by the 5% price bump on the day.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Hassett may be ‘shadow Fed Chair’ for five months: Reuters
• Everything you need to know for Bitcoin and crypto ahead of Jerome Powell’s upcoming FOMC meeting: Cryptoslate
• Vanguard Will Now Allow Crypto ETFs on Its Platform: YahooFinance
• Ethereum Price Swells as Fusaka Upgrade Goes Live: Decrypt
• Digital Asset raises fresh funding to scale Canton Network adoption: Cointelegraph

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.