12.15 AI Daily: Cryptocurrency Market Turmoil and Regulatory Tightening: Federal Reserve Rate Hike Sparks Global Economic Uncertainty

Part I. Headlines

1. Federal Reserve Chair Powell signals hawkish stance; crypto markets plummet

Federal Reserve Chair Jerome Powell stated in a speech that to control inflation, the Fed will continue to raise interest rates and maintain restrictive monetary policy for some time. This hawkish commentary immediately caused sharp market fluctuations, with mainstream cryptocurrencies like Bitcoin dropping sharply.

Powell emphasized that although recent data shows inflation has slowed, it remains well above the 2% target. To restore price stability, the Fed will further raise rates and keep them at a high level until inflation data continues to decline and approaches the 2% target again.

Market analysts note that Powell’s speech highlights the Fed’s determination to curb inflation. Expectations of further rate hikes will increase pressure on risk assets, and high-risk investments like cryptocurrencies are likely to remain under pressure. Meanwhile, traditional financial markets also experienced significant volatility, with the S&P 500 index dropping nearly 2% intraday.

2. EU regulators call for comprehensive regulation of crypto assets

EU banking regulators have called for the development of a comprehensive regulatory framework for crypto assets to address financial stability risks posed by cryptocurrencies. The authorities warned that inaction could pose systemic risks to the financial system.

In a report, the regulator pointed out that the rapid development of the crypto market, high volatility, and increasing integration with traditional finance pose potential threats to financial stability. The report recommends establishing a comprehensive regulatory framework, including prudential supervision of issuers, exchanges, and wallet providers.

Analysts say this call reflects growing regulatory concern over crypto risks. Comprehensive regulation could help curb excessive speculation and manipulation, protecting investors, but might also hinder innovation. Industry insiders are divided, and future regulatory directions are likely to spark intense debate.

3. Japan proposes a 20% flat tax on cryptocurrency trading income

The Japanese government plans to impose a flat 20% tax rate on income from cryptocurrency trading, aiming to reduce investors’ tax burden and stimulate the domestic crypto market. This move will give crypto trading income the same tax treatment as stocks and other financial products.

Currently, Japan taxes crypto trading income under a comprehensive tax system, with a top rate of up to 55%. The new policy will replace this with a uniform 20% flat rate. Analysts believe this adjustment will make crypto investments more attractive and support Japan’s crypto ecosystem development.

However, some argue that lowering the tax rate could encourage speculation and market volatility. Therefore, the new policy must be accompanied by improved regulatory measures to prevent market chaos. Overall, the goal is to balance innovation with risk management to promote orderly growth in Japan’s crypto industry.

4. Hong Kong regulators approve Ripple to expand payment services

Reports indicate that Ripple Labs has received approval from the Hong Kong Monetary Authority to expand its payment operations in Hong Kong, as part of Ripple’s broader strategy to grow its business and provide services to institutions through acquisitions.

HKMA stated that Ripple has been granted a full license to operate payment services in Hong Kong. Previously, Ripple had obtained a payment license in Singapore. Analysts believe this move will help Ripple expand its presence in Asia and lay the groundwork for the application of its XRP cryptocurrency.

Meanwhile, Ripple is engaged in a long-term legal battle with the U.S. Securities and Exchange Commission over whether XRP qualifies as a security. A favorable outcome could significantly boost Ripple’s business in the U.S. Overall, Ripple is actively developing its crypto payment network globally.

( 5. Cryptocurrency exchange Get launches physical rewards campaign

Renowned crypto exchange Get has launched a double lottery campaign for new users, offering a prize pool that includes USDT airdrops and physical prizes such as Dyson hair dryers. Users can participate by completing designated tasks to earn chances to win, with top prizes including $888 cash and physical items.

Get states that the campaign aims to attract more users to join the platform and enjoy a high-quality trading experience. Analysts note that offering physical rewards has become a common marketing tactic for exchanges, helping to boost brand awareness and expand user base.

However, some believe over-reliance on promotional activities may impact long-term platform growth. Exchanges should focus on improving product and service quality to build a sustainable market reputation. Overall, such campaigns have promotional value but product strength remains fundamental for longevity.

Part II. Industry News

) 1. Bitcoin briefly dips below $87,000, sparking panic selling

On December 15, Bitcoin temporarily dipped below $87,000, triggering panic among investors. Analysts attribute this decline mainly to signals from Bank of Japan Governor Ueda Kazuo, who indicated that if economic activity and inflation expectations proceed as forecasted, the BOJ will continue raising its policy rates. This caused Asian stock markets to fall sharply at open, and crypto markets to suffer.

Bitcoin’s price fell to around $86,200 in a short period, prompting large-scale liquidations of long positions. Data shows over $426 million of long positions were liquidated within four hours. This mass liquidation exacerbated market panic, accelerating Bitcoin’s decline.

Analysts say the recent Bitcoin drop is driven by macroeconomic shifts. Major global central banks are tightening monetary policy faster, which tightens liquidity and pressures risk assets. Additionally, weak U.S. economic data and high inflation have heightened concerns about the economic outlook.

However, some experts believe Bitcoin may stabilize and rebound in the short term. They note that current levels are relatively reasonable, attracting some capital inflow. As long as the macro environment does not worsen further, Bitcoin could find support at current levels. Overall, Bitcoin is expected to remain in a range-bound pattern in the near term, with investors advised to monitor macro developments closely.

2. Ethereum faces sell-off, drops over 5% intraday

On December 15, Ethereum experienced a sell-off, with a maximum intraday decline exceeding 5%. Analysts attribute this mainly to the sharp decline in Bitcoin. As the second-largest crypto asset, Ethereum’s price often follows Bitcoin’s trend.

Data shows Ethereum fell to about $2,800, a new low for nearly a month. Meanwhile, its intraday trading volume surged, indicating rapid outflows of funds.

Analysts say Ethereum’s decline is primarily due to decreased risk appetite among investors. With rising macro uncertainties, investors tend to reduce risk exposure and seek safe-haven assets. As a risk asset, Ethereum naturally faced sell-offs.

However, some long-term analysts remain optimistic about Ethereum’s prospects. They believe Ethereum, as a pioneer in blockchain technology, still has significant growth potential in areas like decentralized finance (DeFi). If macro conditions stabilize, Ethereum’s price could rebound.

Overall, Ethereum is expected to maintain high volatility in the short term, and investors should stay attentive to macro trends and ecosystem developments.

3. Altcoin market shows divergence; investor sentiment cautious

Amid sharp declines in Bitcoin and Ethereum, the altcoin market exhibits divergence. Some popular altcoins perform relatively better, while others face selling pressure. Analysts say this reflects growing investor caution, with a preference for relatively safer assets.

Data shows Solana ecosystem tokens fared better, with Solana itself dropping only about 2% on December 15. In contrast, tokens of popular chains like Avalanche and Polygon experienced declines over 5%.

Analysts say the relative resilience of Solana tokens is due to their clearer development prospects. Solana has consistently launched new applications and features over the past year, attracting many developers and capital. Its technological strength is also recognized by the market.

In contrast, the outlook for Avalanche and Polygon remains uncertain. They need to continue launching innovative applications and attract more users and funds to strengthen their positions. Under macro uncertainty, investors tend to adopt a wait-and-see attitude rather than heavily allocating to these assets.

Overall, the divergence in the altcoin market indicates cautious investor sentiment. In uncertain macro conditions, investors prefer safer assets rather than blindly chasing hot coins. This situation is likely to persist until macro conditions improve.

Part III. Project Highlights

1. Aptos: Emerging blockchain ecosystem gains attention

Aptos is an emerging blockchain ecosystem founded by former Meta employees. The project recently launched its mainnet, attracting widespread industry attention.

Aptos aims to build a high-performance, scalable blockchain infrastructure. It uses the Move programming language and a novel consensus mechanism to achieve high throughput and low latency. It also focuses on security and composability.

Recent developments show that Aptos has successfully launched its mainnet and conducted its initial token issuance. The project has attracted many developers and investors, with its ecosystem growing rapidly. The team announced several upcoming features and applications.

Aptos brings fresh energy to the blockchain industry. Its innovative technical solutions could address current challenges such as scalability and performance. If Aptos delivers on its promises, it could promote large-scale adoption of blockchain technology.

Industry analysts are generally optimistic about Aptos. Some believe it has the potential to become a leader in next-generation blockchain infrastructure. Others worry about fierce competition and the need for ongoing innovation. Overall, Aptos is regarded as a promising emerging project.

( 2. Sui: Exploring composability in a new generation blockchain

Sui is an emerging blockchain project created by former Meta employees. It aims to explore blockchain’s composability, providing a robust infrastructure for Web3 applications.

Sui adopts an innovative parallel execution model, allowing multiple transactions to execute simultaneously, increasing throughput and efficiency. It also introduces a new asset model enabling assets to be flexibly combined and split, facilitating the development of complex applications.

Recent updates show Sui has successfully launched its testnet, attracting many developers. The team announced upcoming features and applications, including DeFi, NFTs, and gaming.

Sui introduces new approaches to blockchain development. Its innovative tech could solve current issues in composability and efficiency. If it fulfills its promises, Sui could accelerate the development of Web3 applications.

Industry experts are highly interested in Sui. Some see its composability concept as opening new opportunities, while others worry about technical and ecosystem challenges. Overall, Sui is viewed as an innovative project with potential.

) 3. Gensyn: AI and blockchain integration innovation

Gensyn is an emerging Web3 project aiming to combine artificial intelligence (AI)###AI### with blockchain technology to provide powerful computing capabilities for decentralized applications.

The project uses an innovative distributed computing architecture, allowing users to contribute computing resources and earn tokens. Gensyn also introduces a new smart contract language, making it easier for developers to integrate AI models into blockchain apps.

Recent updates show Gensyn has completed its token sale and attracted significant investor interest. The team announced upcoming features and applications, including AI-assisted DeFi, gaming, and prediction markets.

Gensyn’s emergence offers new ideas for blockchain innovation. Combining AI with blockchain could address computational and smart contract flexibility issues. If successful, it could advance Web3 application development.

Industry analysts find Gensyn highly interesting. Many see integrating AI and blockchain as a promising, innovative frontier. However, challenges in technology and ecosystem building remain. Overall, Gensyn is regarded as a noteworthy innovation project.

4. Hyperbolic: A new paradigm for distributed computing

Hyperbolic is an emerging Web3 project focused on creating a distributed computing platform to provide robust computational power for decentralized applications.

It adopts an innovative distributed architecture, allowing users to contribute resources and earn tokens. Hyperbolic also introduces a new smart contract language to deploy complex computations on the blockchain.

Recent updates show Hyperbolic has completed its token sale successfully, attracting many investors. The team announced upcoming features and applications, such as distributed AI training, scientific computing, and financial modeling.

Hyperbolic offers new ideas for blockchain. Its distributed computing approach could solve existing issues in computational capacity and smart contract flexibility. If it achieves its goals, Hyperbolic could promote large-scale Web3 adoption.

Industry experts see Hyperbolic as a promising project. Distributed computing has huge potential to bring new opportunities to blockchain, though technical and ecosystem challenges exist. Overall, it’s regarded as an innovative project worth watching.

5. Schelling AI: Building AI infrastructure for Web3

Schelling AI is an emerging Web3 project aiming to provide AI(AI) infrastructure for decentralized applications.

It adopts an innovative distributed AI architecture, allowing users to contribute compute resources and earn tokens. Schelling AI also introduces a new smart contract language to facilitate AI model integration.

Recent news shows Schelling AI has completed its token issuance, attracting investor interest. The team announced upcoming features and applications, including AI-assisted DeFi, gaming, and prediction markets.

Schelling AI offers new perspectives for blockchain innovation. Combining AI with blockchain could solve current issues like computational capacity and contract flexibility. Success could promote Web3 application development.

Industry experts are highly interested. Some see its AI integration as a major innovation, while others worry about technical and ecosystem challenges. Overall, Schelling AI is viewed as a promising project with potential.

Part IV. Economic Developments

1. Fed raises interest rates by 75 basis points; markets fluctuate sharply

U.S. inflation remains high, with the core PCE price index rising 5.1% year-over-year in September, well above the Fed’s 2% target. To curb inflation expectations, the Fed announced a 75 basis point rate hike on December 14, raising the federal funds target range to 4.25%-4.5%. This is the largest hike since the 1980s.

This move caused significant market volatility. U.S. stocks plunged; the S&P 500 fell 0.61%. The dollar index surged briefly, approaching 105. Bond yields soared; the 10-year U.S. Treasury yield surpassed 3.6%. Meanwhile, risk assets like Bitcoin also plummeted, with Bitcoin briefly dropping below $16,500.

Goldman Sachs Chief Economist Jan Hatzius said the large rate hike reflects concerns over inflation. He predicts the U.S. economy will enter mild recession in 2023. UBS economists believe the Fed needs to hike further, with about 100 basis points more in 2023.

Fed Chair Powell reaffirmed at the press conference that they will continue to tighten to fight inflation. He emphasized that reducing inflation is priority, even if it risks slowing the economy. Markets generally expect the Fed to keep raising rates in 2023 until inflation shows clear signs of decline.

2. Multiple European countries enter recession; eurozone outlook bleak

European statistics show that due to Russia-Ukraine conflict and energy crisis, eurozone economy shrank 0.1% in Q3 2022, a sharp slowdown from 0.8% growth in the previous quarter. Major economies like Germany and Italy are already in recession.

Analysts note that the conflict has driven energy prices higher, disrupted supply chains, and combined with aggressive rate hikes by the European Central Bank, these factors have slowed growth. Goldman Sachs expects eurozone GDP to contract 0.1% in 2023.

ECB President Lagarde announced a 50 basis point rate increase at the December 15 meeting, raising key rates to 2.5%. She said that despite bleak prospects, the ECB will continue rate hikes to curb inflation.

HSBC European Chief Economist Fabio Balboni warned that Europe faces stagflation reminiscent of the 1970s. He forecasts a gradual recovery starting in late 2023, but with modest strength.

Meanwhile, eurozone inflation hit a record 10% in November. The ECB expects inflation to return to 2% only in late 2024. Most analysts believe ECB will continue raising rates in 2023, prolonging stagflation.

( 3. China eases COVID policies, economic reopening boosts market confidence

After nearly three years of strict zero-COVID policies, China announced on December 7 a relaxation of pandemic restrictions. Aimed at reviving the economy battered by COVID, the move also raises concerns about case surges.

National Bureau of Statistics data show that from January to November 2022, China’s GDP grew 3% year-over-year, well below the initial target of 5.5%. Manufacturing investment and consumption also remained weak. Analysts attribute this mainly to prolonged strict zero-COVID measures disrupting economic activity.

Following policy easing, market confidence was boosted. Since mid-December, the RMB appreciated nearly 3% against USD, offshore RMB options show improved bullish sentiment, and Chinese stocks and real estate trust funds rebounded.

Goldman Sachs reports that China’s economic restart will lead to a strong rebound, with 2023 GDP growth forecast at 4.5%. However, it warns that initial reopening may trigger case surges, affecting recovery pace.

Citi economist Liu Yang is more optimistic, expecting 2023 GDP growth at 5.4%, citing accelerated manufacturing and consumption as drivers of renewed growth.

Overall, market sentiment improves about China’s reopening, but caution remains over potential initial pains. The success of a smooth transition will influence the strength and speed of the recovery.