The main question in crypto institutional circles is why the market response was relatively muted to the barrage of positive industry-related newsflow items since the new administration took office. Majors BTC, ETH, and SOL have been relatively flat since January 20. As the chart below shows, the realized volatility of majors remains relatively low compared to when these assets, except for ETH, are trading near or at all-time highs.
The volume of noteworthy news flow items has been breathtaking, so a quick recap is in order.
- On January 21, the SEC announced its crypto 2.0 approach by forming a new crypto task force under commissioner Hester Peirce, probably the best name for this initiative that the industry could hope for. On January 23, the SEC also revoked SAB 121, which removes a significant block for U.S. banks to engage with crypto. On January 30, the SEC also approved Bitwise's BTC and ETH blended ETF. Although this approval was widely expected, partially because the previous administration had approved similar products, it is notable that it happened in only 45 days. Until now, the SEC has typically used the entirety of its 240-day allowed period to provide answers.
- The much-anticipated crypto Executive Order was signed on January 23. It revokes previous orders and establishes a working group to propose a regulatory framework for digital assets, including stablecoins, within 180 days. The order prioritizes protecting individual access to public blockchains and the US dollar's sovereignty while prohibiting a Central Bank Digital Currency (CBDC).
Importantly, not everything that came out over the past few days was seen as positive by everyone in the industry. Some were disappointed by the lack of a mention of a strategic reserve, but only of a stockpile (understood as not selling lawfully seized digital assets). Opinions regarding the Trump and Melania memecoins are mixed.Furthermore, adding Fed chair Jerome Powell’s comment that banks can serve crypto clients as long as they can manage the risk during his press conference, it is hard to remember when the industry got this much relevant positive news flow in only 10 days.
If price action is not exciting, liquidity trends have been more interesting. For example, January 20 was a top-five day for BTC spot volumes and the highest-ever print during a holiday or weekend, and three other following days would score in the top fifteen. SOL had its top three spot turnover days ever in the days following the launch of the Trump and Melania memecoins.
BTC spot ETF flows have also shown strong dynamics, with total net flows likely to stay around $5.0 billion for January. This compares to $4.6 billion in December 2024 and $6.5 billion in November 2024, which triggered the impressive gains at the end of the year. On the other hand, ETH spot ETF flows this month are relatively weak at only $74 million as of January 30, compared to $2.1 billion and $1.1 billion in December and November 2024.
The catalysts for a crypto breakout are undeniably strong, and the lack of an immediate, pronounced market reaction can be seen as somewhat puzzling. It is important to consider most of those who closely follow the industry have been positive and have already built their position ahead of the new administration taking office.
Therefore, further upward movement is likely to require an influx of new capital. Given the multitude of significant events and uncertainties in the broader financial landscape, ranging from macro uncertainties related to fiscal, monetary, and trade policy to the breakneck pace of AI developments, this capital inflow might occur gradually rather than in a sudden rush as witnessed ahead of previous major industry unlocks.
