December Crypto Review: Volatility Amid Regulatory Shifts and Strategic Developments

December Crypto Review: Volatility Amid Regulatory Shifts and Strategic Developments
This month, we cover the significant volatility in the market, with Bitcoin reaching a new all-time high of $108,000 before retracing back to November lows. We also discuss upcoming regulatory shifts, including the eagerly anticipated appointment of Paul Atkins as SEC Chair and the proposed U.S. Treasury Bitcoin Strategic Reserve, which are poised to reshape the investment landscape.
Join us as we provide detailed analyses and insights into these developments and their potential impacts on the crypto market in 2025. Whether you are an institutional investor or a crypto enthusiast, this commentary is designed to keep you informed on the latest trends and opportunities in cryptocurrency.
INSIGHTS AT THE FOREFRONT:
MARKET INTELLIGENCE FROM OUR CIO, Mark Witten
*Market Performance:
- Crypto Markets: The CCI30 Index was down -9.6%, and Bitcoin (BTC) decreased by -2.8% on a significantly increased turnover of $2.1 trillion.
- Portal Digital Fund: Down -3.5%.
- Radiance Multi-Strategy Fund: Down -10.5%.
- Bitcoin Extraction Strategy (BESt):
- Delivered 18.5% in Bitcoin income for December, athough net asset value dropped by -10.5% due to leveraged Bitcoin futures positions initiated when BTC was around $104,000 in line with the BES strategy.
*Past performance is not indicative of future performance. Specific risks may impact on the possibility of such a return in future.
Market Volatility and Influences:
- Bitcoin hit a new ATH of $108,000 before retracting after announcements of fewer rate cuts than expected by Federal Reserve Chair Jerome Powell.
- Anticipation of continued rate cuts persists due to expected economic slowdowns, notably after extensive damage from California wildfires.
- The resignation of SEC Chair Gary Gensler in January 2025 and his expected replacement by pro-crypto Paul Atkins should boost institutional adoption and improve the regulatory landscape.
- Launch of cash-settled Bitcoin ETF options by CBOE Global Markets enhances both regulatory environment and institutional access.
Institutional and Regulatory Developments:
- 2024 saw the SEC approve a substantial number of Bitcoin and Ethereum ETFs, leading to a surge in institutional investment. MicroStrategy and other public companies significantly increased their Bitcoin holdings, reflecting heightened corporate interest.
- Discussions about establishing a Bitcoin Strategic Reserve in the US could further elevate Bitcoin’s institutional acceptance.
2025 Macro Outlook:
- Continued liquidity growth, expanding institutional interest, and favourable legislative developments are anticipated.
- Innovations in AI and blockchain integration are expected to drive significant market disruptions and opportunities, particularly in decentralised finance (DeFi) and AI (DeFAI).
VOLATILITY, REGULATORY SHIFTS & INNOVATIONS PROPEL STRATEGIC ADJUSTMENTS
By Greg Galton, Analyst Adviser
Market Overview:
- Radiance Multi-Strategy Fund: Ended down -10.5%
- Crypto Market Dynamics: CCI30 Index fell by -9.6%
- Bitcoin was slightly better at -2.8%.
*Fund Performance:
- The Bitcoin Extraction Strategy (BESt) generated a larger than usual 18.5% in Bitcoin income for the month of December. However, the BESt net asset value was down 2.0%, reflecting the mark-to-market of outstanding Bitcoin derivative positions. These BTC positions were entered into when Bitcoin was trading at circa $104,000 and will come back into profit when the BTC price recovers to this level, at which point the cumulative Bitcoin extraction will be more accurately reflected in the net asset value.
- Bitcoin’s Market Activity:
- All-Time High: Bitcoin ATH of $108,268 in December.
- Bitcoin-to-Gold Ratio: Surged to a new high of 37.3, meaning Bitcoin could purchase over 37 ounces of gold.
*Past performance is not indicative of future performance. Specific risks may impact on the possibility of such a return in future.
Regulatory and Strategic Developments:
- Bitcoin as a Strategic Reserve: The Bitcoin Policy Institute proposed an executive order to establish a Strategic Bitcoin Reserve under the US Treasury, aiming to recognise Bitcoin as “digital gold”.
- SEC Changes: Anticipated replacement of SEC Chair Gary Gensler with pro-crypto advocate Paul Atkins in January 2025, expected to foster a more favourable regulatory climate for cryptocurrencies.
Cryptocurrency Adoption Trends:
- Meme Coin Popularity: Surpassed Bitcoin in terms of ownership percentages among cryptocurrency users, with memecoins showing significant entry into the crypto market in 2024.
- Corporate and Institutional Bitcoin Purchases: Highlighted by Microsoft’s shareholders’ rejection of a Bitcoin investment proposal and Tether’s accumulation of Bitcoin to bolster its reserves.
Market Infrastructure and Innovation:
- Market Tools and Decentralised Exchanges (DEX) Growth: There is a notable increase in DEX volumes, reflecting a shift towards on-chain trading platforms.
- AI and Blockchain Integration: The rapid development and market cap growth of AI Meme tokens, driven by AI advancements in blockchain applications.
FINAL THOUGHTS
In conclusion, December witnessed significant volatility within the crypto markets, reflecting broader economic uncertainties and shifts in regulatory stances. Despite the downturn, the strategic moves and regulatory advancements anticipated in 2025 suggest a promising horizon for digital assets. The potential establishment of a Bitcoin Strategic Reserve in the U.S., coupled with more favourable legislative environments, may catalyse widespread institutional and sovereign adoption of Bitcoin. With these developments, we remain optimistic about the crypto market’s prospects and continue to see substantial growth opportunities in the evolving landscape of digital assets. As always, we encourage our investors and stakeholders to stay engaged and informed as we navigate these exciting times together.
Disclaimer:This document does not constitute an offer of Participating Shares in the Fund. The offer of Participating Shares is made solely pursuant to the Offering Memorandum for the Fund dated 10 February 2020 (the “Offering Memorandum”), and an application for subscription for Participating Shares may only be made by completing and returning the subscription agreement issued by the Fund (the “Subscription Agreement”). Copies of the Offering Memorandum and the Subscription Agreement may be obtained from First Degree Global Asset Management Pte. Ltd., the Investment Manager of the Fund.
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