12.18 AI Daily: Cryptocurrency Market Experiences Significant Fluctuations, Stricter Regulations Spark Divergence Among Investors

Part I. Headlines

1. Federal Reserve Chair Powell Signals Hawkish Stance, Crypto Markets Plunge

Federal Reserve Chair Powell emphasized in this week’s key speech that inflation pressures remain “stubborn,” hinting at continued rate hikes to curb high inflation. Powell’s hawkish remarks immediately triggered sharp market volatility, with major cryptocurrencies like Bitcoin falling sharply.

Bitcoin briefly dipped below $16,000, hitting a new low since November 2022. Analysts note that Powell’s comments dispelled market expectations of a pause in rate hikes in early 2023. Crypto markets are highly sensitive to interest rate movements and are expected to remain under pressure for some time.

Meanwhile, traditional financial markets also suffered heavy losses. The S&P 500 and Nasdaq both declined over 1%. Investor concerns about a recession intensified, and risk-off sentiment soared. Analysts warn that if the Fed persists with rate hikes, it could cause a hard landing for the economy and trigger greater financial turmoil.

2. China’s Central Bank Takes Strong Action, Multiple Departments Jointly Crack Down on Cryptocurrency Trading and Speculation

The People’s Bank of China recently held a meeting, involving 13 departments including the Public Security Ministry and the Central Cyberspace Administration, to deploy efforts to combat virtual currency trading and speculation. The strong lineup signals that China’s virtual currency regulation is shifting from sectoral coordination to comprehensive systemic governance.

The meeting pointed out that virtual currency trading activities pose risks such as illegal fundraising and gambling, severely disrupting economic and financial order. Agencies will deepen cooperation, improve regulatory policies and legal basis, focus on key links like information flow and capital flow, enhance information sharing, and crack down on illegal activities.

Analysts believe this initiative will reshape regulatory patterns on three levels: first, an upgraded coordination framework with the involvement of the Central Financial Office will elevate regulation from departmental cooperation to cross-sectoral systemic management; second, regulatory depth will increase as the State Financial Regulatory Administration takes a leading role, shifting from basic capital flow monitoring to precise identification and enforcement against illegal financial activities; third, legal frameworks will be improved with the Ministry of Justice’s participation, transitioning regulation from administrative documents to law-based enforcement with stronger legal support.

3. Japan Plans to Tax Cryptocurrency Income Separately, Tax Rate May Drop to 20%

The Japanese government is adjusting its tax policy on cryptocurrency trading income, planning to uniformly impose a 20% income tax regardless of transaction size, aligning it with stocks and investment trusts. This move aims to reduce investors’ tax burden and stimulate domestic trading markets.

Currently, Japan applies a comprehensive taxation method, combining crypto trading income with other income and applying a progressive tax rate up to 55%. The government plans to replace this with a separate taxation system, taxing crypto trading income independently from wages and business income.

Analysts say this will provide a logical basis for integrating virtual assets like stablecoins into anti-money laundering and other regulatory systems. Stablecoins and similar virtual assets will not be considered legal tender or payment tools but will fall under the same regulatory framework as Bitcoin and Ethereum. This also reveals the root compliance risks of stablecoins, which sometimes face “爆雷” (explosive failures), as the underlying asset quality remains difficult to guarantee.

4. Ethereum Network Major Upgrade, New Features Including Account Abstraction Fully Launched

2022 was a pivotal year for Ethereum. The major upgrades, Pectra and Fusaka, introduced core features like account abstraction and validator improvements, significantly enhancing Ethereum’s performance, scalability, and user experience.

Among these, the highly anticipated account abstraction(EIP-7702) was finally activated in the Pectra upgrade. It allows users to sign transactions with any type of key pair, breaking the traditional Ethereum address format constraints and laying the foundation for decentralized identity recognition and privacy protection.

Meanwhile, the Fusaka upgrade optimized validator mechanisms, improving network security and reliability. Analysts believe that the thriving Ethereum ecosystem depends on continuous infrastructure innovation. These upgrades inject new vitality into DeFi, NFTs, and other hot applications, strengthening Ethereum’s leading position in the Web3 era.

5. Sony Bank Plans to Issue USD-Linked Stablecoin, Focus on Crypto Payment Scenarios

Reports indicate that Sony Bank may issue a USD-pegged stablecoin in the US by fiscal year 2026, intended for use within its ecosystem for payments related to gaming and anime content. This move is seen as a strategic layout by Sony Group in the crypto payment space.

Analysts note that issuing a USD-pegged stablecoin can avoid risks associated with sharp crypto price fluctuations, providing a more stable payment experience for users. Leveraging its influence in gaming and entertainment, Sony could inject new vitality into stablecoin application scenarios.

However, stablecoin regulation remains a major challenge. Recently, SEC Chair Gensler stated that most tokens issued by crypto projects should be considered securities and must comply with relevant rules. How to advance stablecoin development within regulatory frameworks will be a new challenge for companies like Sony.

Part II. Industry News

1. Bitcoin Briefly Falls Below $17,000, Triggering Market Panic

On December 18, Bitcoin briefly fell below $17,000, causing intense volatility in the crypto market. Analysts attribute this decline mainly to macroeconomic uncertainties and investor concerns over potential rate hikes.

Bitcoin dropped over 5% in a short period, reaching around $16,950, the lowest since late November. It then rebounded slightly but remained around $17,200. Meanwhile, other major cryptocurrencies like Ethereum and Solana also experienced significant declines.

Market sentiment turned pessimistic, with trading volume surging. Data shows that over the past 24 hours, the total crypto market cap evaporated by more than $100 billion. Fears of a global recession intensified, prompting risk asset withdrawals. Analysts warn that if Bitcoin cannot find strong support at $17,000, it could further decline to $16,000 or lower.

However, some long-term analysts remain optimistic about Bitcoin. They believe Bitcoin’s role as an alternative investment and store of value offers unique advantages amid high inflation. As long as economic fundamentals do not deteriorate fundamentally, Bitcoin could regain upward momentum in the coming months.

2. Ethereum Loses Over 10% in a Single Day, DeFi Ecosystem Severely Impacted

On December 18, Ethereum’s price plummeted over 10%, delivering a heavy blow to the entire DeFi ecosystem. Analysts attribute this to growing concerns over tightening crypto regulations and a slowing global economy.

Ethereum briefly fell to $1,180, its lowest in nearly two months. Meanwhile, major DeFi tokens like Uniswap, Aave, and Compound also declined by double digits.

Total Value Locked (TVL) in DeFi lending platforms decreased by nearly 10% in the past 24 hours, reflecting large-scale capital withdrawals. Analysts warn that this capital outflow could further exacerbate liquidity crises within DeFi and negatively impact project development.

However, some believe this correction offers a good opportunity for DeFi projects to improve technology and optimize products, preparing for future rebounds.

Overall, Ethereum and DeFi are facing severe tests. Only projects with real use cases and sustainable business models will survive this industry reshuffle and achieve greater growth in the future.

( 3. Solana Encounters Network Congestion, Transaction Fees Surge

On December 18, Solana experienced another network congestion, causing transaction fees to spike sharply. Data shows that the average transaction fee exceeded $5, several times higher than normal.

The congestion was mainly caused by a new game project, Aptos, in the Solana ecosystem, which triggered a large number of transaction requests. Due to Solana’s limited throughput, many transactions accumulated in memory pools and could not be processed in time, leading to network blockage.

The Solana Foundation is working to resolve this issue, but analysts point out that this exposes Solana’s scalability limitations. Compared to mature blockchains like Ethereum, Solana still faces significant challenges in handling high concurrency.

Some remain optimistic about Solana. They believe the ecosystem is rapidly developing, attracting many talented developers and projects. With ongoing optimization and upgrades, network performance will eventually improve.

During this congestion event, Solana’s token SOL briefly fell nearly 10%, to $12.80. Analysts warn that if the Foundation cannot address scalability promptly, SOL may face further downward pressure.

) 4. Crypto Market Volatility Sparks Divided Investor Sentiment

On December 18, the crypto market experienced intense volatility, with major tokens falling sharply. At the same time, investor sentiment showed clear division.

On one side, some investors are pessimistic about the outlook for cryptocurrencies, citing macroeconomic headwinds and the high-risk nature of digital assets, leading to widespread sell-offs. Stricter regulations also cast a shadow over the market.

On the other side, some remain optimistic about long-term prospects, believing cryptocurrencies represent the future of financial technology. As long as projects continue to innovate and provide real use cases, crypto will regain market recognition.

Data shows that over the past 24 hours, total crypto market cap declined by over $150 billion, with daily trading volume surging to nearly $300 billion, reflecting extreme swings in investor sentiment.

Analysts advise caution in the current uncertain environment, emphasizing risk management and patience with quality projects. Only cryptocurrencies with long-term value will sustain growth and development.

Part III. Project News

1. Sui Blockchain Launches SuiPlay Gaming Platform, Leading a New We Gaming Experience

Sui, developed by Mysten Labs, is a new layer-1 blockchain designed to provide high-performance, low-cost infrastructure for the We era. Recently, Sui launched the SuiPlay gaming platform, offering users an innovative We gaming experience.

SuiPlay is the first platform within the Sui ecosystem targeting gamers, integrating multiple popular blockchain games. Players can enjoy free access to various games and earn through on-chain asset trading. The platform leverages Sui’s underlying technology to deliver high throughput and low transaction fees, greatly enhancing gaming experience.

The launch of SuiPlay marks Sui’s official entry into the We gaming field. With excellent performance and innovative design, Sui aims to become the preferred infrastructure for We games. Industry insiders believe SuiPlay will bring seamless We experiences to traditional gamers and help popularize blockchain gaming on a large scale.

Several well-known game studios, including Colossal and Illuvium, have joined SuiPlay. They are optimistic about Sui’s technological strength and ecosystem potential. In the future, SuiPlay will continue to introduce more quality games, offering players diverse gaming options.

2. Aptos Launches AptosMall Business Application, Opening a New Mode of We Commerce

Aptos, created by former Meta employees, is a high-performance, scalable layer-1 blockchain. Recently, the Aptos ecosystem launched AptosMall, a commercial application aimed at building a new business model for the We era.

AptosMall is a decentralized marketplace based on Aptos blockchain, integrating innovative features. Merchants can set up online stores and sell goods via NFTs and other digital assets. Consumers can purchase products with cryptocurrencies and obtain unique digital ownership.

AptosMall’s core is to reshape business processes using blockchain technology, achieving true decentralization. It uses Aptos’s underlying tech to ensure efficient and secure transactions. It also supports cross-chain interoperability, planning to connect with more blockchains and payment methods.

The launch of AptosMall is seen as a significant step in Aptos’s expansion into the commercial sector. Analysts believe this innovative model could disrupt traditional e-commerce and offer consumers a new shopping experience. Major brands have already joined, and the platform plans to expand merchants and product offerings further.

Industry experts are optimistic about AptosMall’s prospects. They see blockchain-based decentralized commerce as a future trend, and believe AptosMall will lead this transformation.

3. Arrum Releases AirMesh Network to Promote Ethereum Layer 2 Scaling

Arrum, a leading Layer 2 scaling solution in the Ethereum ecosystem, recently announced the AirMesh network, aiming to further improve Ethereum’s scalability and user experience.

AirMesh is a new Layer 2 network architecture developed independently by the Arrum team. It adopts an innovative data availability proof mechanism, greatly increasing throughput. It also supports high EVM compatibility, enabling seamless migration of existing Ethereum applications.

The launch of AirMesh marks a new phase for Arrum’s scaling solutions. With outstanding performance and compatibility, AirMesh will bring unprecedented expansion space to the Ethereum ecosystem, fostering more innovative applications.

Several well-known DeFi protocols and NFT projects have announced deployment on AirMesh. They are confident in AirMesh’s technical strength and future prospects. Arrum continues to optimize AirMesh to ensure network security and stability.

Analysts believe that AirMesh’s release will further solidify Arrum’s leadership in Layer 2 scaling. In the future, Arrum is expected to become one of the most important scaling solutions in Ethereum, supporting large-scale applications.

4. Cosmos Ecosystem’s IBC Protocol Upgraded, Major Enhancement in Cross-Chain Interoperability

Cosmos aims to build an interconnected blockchain network ecosystem. Recently, the IBC###Inter-Blockchain Communication### protocol within Cosmos was significantly upgraded, greatly enhancing cross-chain interoperability.

IBC is the core mechanism for cross-chain communication in the Cosmos ecosystem. The upgrade focused on improving security, scalability, and user experience. The new IBC supports higher throughput and introduces new security features to prevent risks like replay attacks.

This upgrade marks a new development stage for the Cosmos ecosystem. Analysts believe it will greatly promote asset flow and value exchange within Cosmos, laying a foundation for a truly interconnected blockchain network.

Several Cosmos projects have announced their early adoption of the upgraded IBC protocol. They highly praise the upgrade’s significance, seeing it as a major step forward for Cosmos. Meanwhile, the Cosmos development team is actively exploring more applications for IBC to unlock its full potential.

Industry insiders generally view the IBC upgrade as having a profound impact on Cosmos. They believe it will further enhance Cosmos’s competitiveness and secure its position in the blockchain internet.

Part IV. Economic Dynamics

( 1. US Federal Reserve Raises Rates by 75 Basis Points, Reaffirms Commitment to Fight Inflation

The US economy continued to slow in Q4 2025. Latest data shows Q3 GDP grew at an annualized rate of 1.9%, below the previous quarter’s 3.2%. Inflation has eased but remains high at 6.5%. Unemployment rose slightly to 4.1%, indicating a slowing labor market.

At the December 18 FOMC meeting, the Fed announced a 75 basis point rate hike, raising the federal funds rate target to 4.25%-4.5%. This marks the seventh consecutive large rate increase, reflecting a firm stance on curbing inflation.

Fed Chair Powell stated at the press conference that inflation pressures remain severe, and the labor market is still too tight. He emphasized that the Fed will persist with rate hikes until inflation shows clear signs of slowing. Powell’s hawkish tone sparked market concerns, with investors broadly expecting the US economy to enter recession by 2026.

Goldman Sachs chief economist Jan Hatzius believes the Fed’s decision aligns with expectations, but the rate hike path may be more aggressive than previously thought. He forecasts the Fed will raise rates to 5%-5.25% by early 2026. UBS economists warn that if inflation remains high, the Fed may need to push rates above 6%.

) 2. China Releases 2025 Economic Data, GDP Growth at 6.1%

China’s National Bureau of Statistics announced that in 2025, China’s GDP grew by 6.1% year-on-year, within the targeted range of 6%-6.5%. Q4 GDP increased by 6.2% year-on-year, showing a rebound from previous quarters.

Full-year fixed asset investment rose 5.1% YoY, accelerating 0.4 percentage points from last year. Manufacturing investment grew 7.2%, with high-tech manufacturing up 12.9%, both maintaining rapid growth.

Retail sales of consumer goods increased 9.6% YoY, up 1.2 percentage points from last year. The service production index rose 7.9%, also up 1.1 points. Urban employment added 12.1 million jobs, and the urban surveyed unemployment rate at year-end was 5.1%.

People’s Bank of China Governor Yi Gang said that China’s economy operated generally smoothly in 2025, with key macro indicators remaining within reasonable ranges. Looking ahead to 2026, China will continue implementing proactive fiscal policies and prudent monetary policies to maintain macroeconomic stability.

CICC macro analyst Li Xunlei believes China has emerged from pandemic shadows, with manufacturing investment and exports maintaining rapid growth, injecting new momentum into the economy. However, inflationary pressures are rising, requiring close attention. He forecasts China’s GDP growth in 2026 to be around 6.5%.

3. Eurozone Inflation Hits New High, ECB May Hike Rates by 50 Basis Points Again

Eurostat data shows that November’s eurozone inflation rate surged to 10.6%, a new high. Energy prices rose 34.9% YoY, food, alcohol, and tobacco prices increased 13.6%, driving inflation higher.

Core inflation###excluding energy and unprocessed food###stood at 5%, well above the ECB’s 2% target. Following the data release, eurozone government bond yields generally rose, reflecting market expectations of further ECB rate hikes.

ECB President Lagarde stated in a subsequent speech that inflation remains high and the path of rate hikes is still long. She hinted that the ECB might raise rates significantly again at the December 15 policy meeting to contain inflation expectations.

Goldman Sachs European economist Jari Stehn expects the ECB to hike rates by 50 basis points in December, raising deposit rates to 2.5%. He predicts the ECB will continue rate hikes into 2026, reaching a peak of 3.25%-3.5%.

UBS forecasts that the ECB will end its rate hike cycle in the first quarter of next year, with deposit rates reaching 3%. Eurozone economist Anna Titareva notes that risks of high inflation and economic slowdown will persist, and the ECB needs to balance inflation control with avoiding a hard landing.

( 4. Bank of Japan Maintains Ultra-Loose Policy, Yen Plummets to 138 Yen/USD

In the December 19 rate decision, the Bank of Japan unexpectedly kept its ultra-loose monetary policy unchanged, including maintaining the 10-year government bond yield cap at 0.5%. This diverged from market expectations, causing the yen to sharply fall nearly 4%, briefly breaking below 138 yen per dollar.

BOJ Governor Kuroda Haruhiko stated at the press conference that despite inflation reaching its highest in nearly 40 years, core inflation remains below 2%. Therefore, the central bank decided to continue large-scale easing until inflation sustainably reaches around 2%.

This decision deepens the divergence between BOJ and other major central banks like the Fed, ECB, and Bank of England, which are tightening to fight inflation.

Nomura Securities FX strategist Daisaku Ueno said the BOJ’s decision surprised markets, and the yen could further depreciate to 150 yen per dollar. Goldman Sachs projects the yen will further weaken to 145 yen per dollar by 2026.

Economists generally believe yen depreciation will further increase Japan’s import costs and inflation pressures. However, Kuroda expects current inflation to be mainly cost-push and forecasts inflation will fall below 1% in 2026.

Part V. Regulation & Policy

) 1. US SEC Releases Draft Framework for Cryptocurrency Regulation

The US Securities and Exchange Commission###SEC### recently published a draft framework for crypto asset regulation, aiming to establish unified rules for the crypto market. As the primary regulator of US securities markets, the SEC has long sought to incorporate crypto assets into existing regulatory systems. This draft marks a significant step forward.

The draft proposes comprehensive regulation of crypto issuance, trading, and intermediaries, including: classifying securities under the Howey test for tokens; requiring registration and compliance for exchanges and brokers; imposing disclosure obligations on issuers. It also includes specific rules on classification, AML, and consumer protection.

Once implemented, the draft will have profound industry impacts. It will enhance legal protections for investors, increase market transparency, and promote healthy long-term development. Conversely, it may also raise compliance costs for crypto firms and force some projects to exit the US market.

Reactions are mixed. Supporters believe a unified regulatory framework will bring certainty and attract institutional capital. Critics worry overregulation could stifle innovation. The Chair of the Crypto Investors Association expressed concern that some provisions might limit access to new crypto assets.

Experts say the SEC’s move aims to reshape crypto regulation and protect investors. Balancing innovation with regulation will be a major challenge, given the innovative nature of crypto assets. The SEC may revise the draft further and maintain industry dialogue to reach consensus.

( 2. Hong Kong Securities and Futures Commission Issues Guidelines for Crypto Trading Platforms

Hong Kong’s Securities and Futures Commission)SFC### recently issued guidelines for crypto asset trading platforms, establishing a regulatory framework for Hong Kong’s crypto industry. As an international financial hub, Hong Kong is actively exploring crypto regulation. The new guidelines mark a key step.

The guidelines specify that all crypto trading platforms operating in Hong Kong must obtain SFC licensing. Platforms must meet compliance requirements including investor fund protection, AML, market manipulation prevention, etc. They also detail rules on platform scope, risk disclosures, operational capital, and more.

The SFC stated that the guidelines aim to create a favorable regulatory environment, protect investors, and promote fintech development. Once enforced, they will bring greater certainty and growth opportunities to Hong Kong’s crypto sector.

Industry insiders generally welcome the move. The Hong Kong Crypto Association Chair believes a unified framework will improve transparency and attract more institutional investors. Some worry, however, that strict regulations could increase compliance costs.

Experts note that Hong Kong’s approach draws on international experience to build a regulation system suited to local conditions. Future efforts may include refining laws and maintaining industry communication to foster orderly growth.

( 3. EU Approves Markets in Crypto-Assets (MiCA) Regulation

The European Union recently approved the Markets in Crypto-Assets (MiCA) regulation, the EU’s first comprehensive crypto regulatory framework. As a major global economy, the EU’s move will significantly influence worldwide crypto markets.

MiCA establishes uniform rules for issuers, exchanges, and wallet providers. These include: mandatory disclosure by issuers; operational standards for exchanges and wallets; enhanced AML and consumer protections. It also covers asset classification, licensing, and cross-border regulation.

The EU Commission states that MiCA aims to create a favorable environment for crypto markets, protect investors, and foster financial innovation. Once enacted, it will bring greater certainty and development opportunities for the EU crypto industry.

Reactions are mixed. Supporters see it as increasing transparency and attracting institutional funds. Critics worry it may overregulate and hinder innovation.

Experts believe MiCA marks the EU’s formal inclusion of crypto assets into regulation, setting a global example. Balancing regulation and innovation remains a challenge, and future updates are expected to refine the framework and promote industry growth.