Crypto Daybook Americas: China's Economic Woes Offer Hope as Fed Rate Crashes BTC

By Omkar Godbole (All times ET unless indicated otherwise)

Keeping an eye on the Far East has been our mantra lately, and the latest news from the Chinese bond market shows why. Just today, China's one-year government bond yield dropped below 1% for the first time since the Great Financial Crisis, adding to the year-to-date downturn. The benchmark 10-year yield slipped to 1.7%.

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How does that play out for risk assets like bitcoin, which slumped overnight? Well, there are two key reasons to feel optimistic. For a start, the continued decline in yields suggests Beijing will have to roll out more aggressive stimulus measures than we saw earlier this year.

Jeroen Blokland, the founder and manager of the Blokland Smart Multi-Asset Fund, put it succinctly: “This indicates that China's economic troubles are far from over, and the government will do what aging economies often do: ramp up government spending, allow for larger deficits and higher debt levels, and drive interest rates down toward zero.”

And there's more to consider. This situation in China also raises questions about Fed Chairman Jerome Powell's recent alarm over interest rates, which sent bitcoin tumbling to $95,000 from $105,000.

China, the world's factory, is facing worsening deflation having already experienced the longest stretch of falling prices since the late 1990s. That could cap PPI and CPI readings worldwide, including in the U.S., a major trading partner.

BNP Paribas noted this phenomenon earlier this year, with analysts saying that China has already contributed to lowering core inflation in the eurozone and the U.S. by about 0.1 percentage point and core goods inflation by roughly 0.5 percentage point.

What this means is that Powell's concerns about stubborn inflation may be unfounded and begs the question whether he will really stick to just two rate cuts for 2025 as he implied on Wednesday? Many experts think there might be more.

“Fed concerns on inflation are misguided. Interest rates are still too high in the U.S., and liquidity is about to increase, driving Bitcoin higher,” said Dan Tapiero, CEO and CIO of 10T Holdings, on X, alluding to China's declining bond yields.

For now, markets aren't considering this bullish angle. BTC has dropped below $95,000 and ETH has slipped to $3,200. All the 100 biggest coins are flashing red. Futures tied to the S&P 500 are down 0.5%, indicating a negative open and continuation of the post-Fed risk-off.

Sentiment may worsen if the core PCE, the Fed's preferred inflation gauge, comes in hotter than expected later today. That might see markets price out another rate cut, leaving just one on the table for 2025. Stay alert!

What to Watch

Token Events

Token Launches Binance Alpha announced the fourth batch of tokens, including BANANA, KOGE, BOB, MGP, PSTAKE, GNON, Shoggoth, LUCE and ODOS. Binance Alpha is the pre-selected pool for Binance listings.



Conferences:

Token Talk

By Shaurya Malwa



Fartcoin (FART) just touched $1 billion.



The scatologically named AI agent token jumped over $1.1 billion in market cap early Friday even as the broader market saw a second-straight day of losses, becoming one of the few tokens in the green.

FART's rise is as much about human psychology as economics. In a market where fundamental investments are faltering, it has become a symbol of the absurd, a light-hearted rebellion against the grim financial forecasts.

Its platform allows users to potentially submit related-theme memes or jokes to earn tokens. It features a unique transactional system where each trade produces a digital flatuence sound.

People are investing not for the promise of utility or groundbreaking technology but for the joy of the moment, the shared giggle over a coin whose name alone is enough to break the tension of the day.

It isn't all about the jokes, though. The token is part of the rising AI agent crypto sector, one that claims to use AI-powered entities to perform tasks on blockchain networks autonomously under a memecoin branding.

Derivatives Positioning

The BTC one-month basis has pulled back to 10% on the CME while the three-month basis has dropped to around 12% on offshore exchanges. ETH futures display similar behavior.

Most major tokens are showing negative perpetual cumulative volume deltas for the past 24 hours, a sign of net selling pressure. DOGE has seen the most intense selling.

Front-end BTC and ETH show a strong put bias, but calls expiring on Jan. 31 and beyond continue to trade at a premium.

Block trades in options leaned slightly bearish, with large transactions involving a standalone long position in the $75K put expiring on Jan. 31.

Someone sold a large amount of ETH $3K put.

Market Movements:

BTC is down 2.55% from 4 p.m. ET Thursday to $94,947.95 (24hrs: -7.92%)

ETH is down 5.41% at $3,232.19 (24hrs: -14.06%)

CoinDesk 20 is down 5.14% to 3,196.80 (24hrs: -13.12%)

Ether staking yield is up 7 bps to 3.19%

BTC funding rate is at 0.01% (10.95% annualized) on Binance

DXY is down 0.25% at 108.14

Gold is up 1.11% at $2,621.1/oz

Silver is up 0.65% to $29.28/oz

Nikkei 225 closed -0.29% at 38,701.90

Hang Seng closed -0.16% at 19,720.70

FTSE is down 1.05% at 8,020.42

Euro Stoxx 50 is down 1.36% at 4,812.53

DJIA closed on Thursday unchanged at 42,342.24

S&P 500 closed unchanged at 5,867.08

Nasdaq closed -0.1% at 19,372.77

S&P/TSX Composite Index closed -0.58% at 24,413.90

S&P 40 Latin America closed +0.40% at 2,187.98

U.S. 10-year Treasury is down 0.03% at 4.54%

E-mini S&P 500 futures are down 0.79% to 5,822.25

E-mini Nasdaq-100 futures are unchanged at 21,112.25

E-mini Dow Jones Industrial Average Index futures are down 0.53% at 42,134.00

Bitcoin Stats:

BTC Dominance: 59.21 (24hrs: +0.58%)

Ethereum to bitcoin ratio: 0.034 (24hrs: -1.37%)

Hashrate (seven-day moving average): 785 EH/s

Hashprice (spot): $62.5

Total Fees: $2.3 million

CME Futures Open Interest: 211,885 BTC

BTC priced in gold: 36.3 oz

BTC vs gold market cap: 10.34%

Bitcoin sitting in over-the-counter desk balances: 409,300 BTC

Basket Performance

Technical Analysis

BTC's daily chart (TradingView)

BTC is fast approaching the lower end of the recent expanding channel pattern.

A UTC close below the support line could entice more chart-driven sellers to the market, potentially leading to a deeper drop to $80,000, a level widely watched after the U.S. election.

Crypto Equities

MicroStrategy (MSTR): closed on Thursday at $326.46 (-6.63%), down 5.35% at $309.00 in pre-market.

Coinbase Global (COIN): closed at $273.92 (-2.12%), down 5.65% at $258.43

in pre-market.

in pre-market. Galaxy Digital Holdings (GLXY): closed at C$24.75 (-5.93%)

MARA Holdings (MARA): closed at $20.37 (-5.74%), down 4.52% at $19.41 in pre-market.

Riot Platforms (RIOT): closed at $11.19 (-6.36%), down 4.2% at $10.72 in pre-market.

Core Scientific (CORZ): closed at $14.48 (+0.21%), down 4.42% at $13.84 in pre-market.

CleanSpark (CLSK): closed at $10.91 (-3.62%), down 3.94% at $10.48 in pre-market.

CoinShares Valkyrie Bitcoin Miners ETF (WGMI): closed at $24.45 (-5.56%), down 2.66% at $23.80 in pre-market.

Semler Scientific (SMLR): closed at $61.34 (-5.66%), down 4.22% at $58.75 in pre-market.

Exodus Movement (EXOD): closed at $50.95 (-4.05%), unchanged in pre-market.

ETF Flows

Spot BTC ETFs:

Daily net flow: -$671.9 million

Cumulative net flows: $36.310 billion

Total BTC holdings ~ 1.142 million.

Spot ETH ETFs

Daily net flow: -$60.5 million

Cumulative net flows: $2.406 billion

Total ETH holdings ~ 3.565 million.

Source: Farside Investors

Overnight Flows

Chart of the Day

Annualized perpetual funding rates for major cryptocurrencies (Velo Data)

The chart shows annualized perpetual funding rates for major cryptocurrencies have been reset to healthier levels below 10%.

The market swoon has cleared out over-leveraged bets.

While You Were Sleeping

In the Ether