Policy Tailwinds Usher in New Highs as Fed Pauses

Gabriel Selby -

Key takeaways for the month

  • Regulatory Tailwinds Drive Bitcoin to New Highs: Digital assets kicked off the new year on a positive note. President Trump issued an executive order on digital financial technology, establishing a new Presidential Working Group to develop comprehensive federal regulatory frameworks for digital assets. This coincided with the SEC's strategic moves to ease cryptocurrency regulations, including the repeal of SAB 121 and formation of a dedicated Crypto Task Force under Commissioner Peirce's leadership. The cryptocurrency market reflected this favorable regulatory change, with Bitcoin reaching a new high, breaking above $109,000 on the CME CF Bitcoin Real-Time Index. Meanwhile, the Federal Reserve maintained its cautious stance, holding rates at 4.25-4.50% amid ongoing inflation risks considerations.
  • Large-Caps Outperform as Digital Culture Index Lags: Our CF Ultra Cap 5 Index led market performance, rising 11.12%, reflecting strong large-cap crypto resilience. The CF Free-Float Broad Cap Index and CF Smart Contract Platforms Index followed, increasing 10.28% and 5.86%, respectively, benefiting from positive investor sentiment. Conversely, the CF Digital Culture Index and CF Blockchain Infrastructure Index lagged, declining 6.24% and 2.68%, indicating weaker investor sentiment in niche digital assets. Meanwhile, the CF DeFi Index finished the month mostly unchanged, closing 0.82% higher.
  • Bitcoin Dominates Fund Flows, Ether Sees Outflows: Fund flows into digital assets continued in January, with investors allocating over $4.5 billion. Bitcoin captured the majority of inflows, exceeding $4.4 billion, while Ether experienced a slight outflow of -$82 million.
  • CME Ether Futures Open Interest Continues to Hit Record Highs: Total open interest in CME Ether futures continued to grow in January, rising nearly 14% from the previous month and reaching new all-time highs. Bitcoin futures open interest also increased, ending the month with a modest gain of 1.3%.
  • DeFi TVL Climbs as Token Prices Rise: Total Value Locked (TVL) in decentralized finance (DeFi) protocols grew by 3.1% over the past month to approximately $221 billion. This gain was largely attributed to the increased value of tokens locked in liquid staking protocols on Ethereum and Solana.
  • Bitcoin Hash Rate Rises as Miners' Revenue Declines: Bitcoin’s average monthly hash rate increased in December, rising 9.0% to reach 646 exahashes per second. Mining difficulty, which measures the computational effort required to mine a new block and adjusts to ensure consistent block creation times, declined by -1.5% over the month. Bitcoin miners saw a 2.6% decrease in mining revenues in January. Of the total miner rewards for the month, 1.4% came from fees, down from 2.7% in December. Despite a rise in Bitcoin’s price, declining on-chain activity led to lower revenues for miners.
  • Solana Fees Skyrocket as DeFi Activity Increases: In January, total fees paid on the Solana network surged 158.8% from the previous month to $165.7 million. MEV accounted for approximately 61.9% of total fees, reflecting strong demand for block space driven by competitive on-chain activity.
Source: CF Benchmarks, Bloomberg, as of January 31, 2025

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