The Fed's interest rate tweaks and the Bitcoin market game

At the end of the year, the Federal Reserve faces a dilemma between curbing inflation and maintaining employment—continuing to fine-tune interest rates to control inflation while also responding to signals of a softening job market. This policy divergence was theoretically bullish for crypto assets, but what about the actual effect? The large liquidity injections at the end of the year didn't have as much impact on the crypto space as expected.

More interestingly, the US government holds $30.7 billion in crypto assets. At first glance, this number sounds alarming, but upon closer inspection, most of these come from law enforcement seizures and case recoveries, which are not the same as actively allocating assets. From a fiscal and industry support perspective, the significance of these holdings is actually quite limited. In other words, this cannot be considered a true endorsement of the crypto ecosystem by the government.

So, the key still depends on how the Federal Reserve proceeds next. Clear signals from policy are often more influential on market expectations than the surface-level asset figures.