Fusaka Scaling & Institutional Shift Power Crypto Rally, But All Eyes on The Fed | Frontier Lab…

Fusaka Scaling & Institutional Shift Power Crypto Rally, But All Eyes on The Fed | Frontier Lab Weekly

Market Overview

Market Summary

The cryptocurrency market showed a volatile trend this week, with both BTC and ETH trending upward. The market sentiment index rose from 35 last week to 42, entering the neutral zone overall.

Stablecoin Market Dynamics

The total stablecoin market capitalization increased this week, showing a significant rise compared to last week, with both USDT and USDC seeing concurrent growth:

• USDT: Market cap reached $185.4 billion, a week-over-week (WoW) increase of 0.43%. While the net capital inflow observed last week, the scale of inflow this week was smaller, not reaching the $1 billion mark. This suggests that capital primarily from non-U.S. Investors remained relatively cautious this week.
• USDC: Market cap reached $78.0 billion, a WoW increase of 2.63%. It continued last week’s upward trend, and the increase this week reached a scale of $2 billion, which is the largest capital inflow in the past month. This indicates that U.S. Investors are starting to re-enter the market this week.

Market Driving Factors Analysis

• Positive Shift in Institutional Capital Flows: This week, BTC and ETH spot ETFs and publicly listed treasury companies continued last week’s buying trend. Although the overall buying volume was modest, the pattern of buying more than selling was maintained, indicating a gradual restoration of market confidence.
• Historical Turn in Traditional Financial Institutions’ Attitude: Vanguard, the world’s largest asset management firm, is now allowing investors to trade Bitcoin spot ETFs, reversing its prohibition stance from last year. Its $11 trillion in assets under management could bring potential capital inflows to the Bitcoin market, significantly boosting market sentiment.
• Positive Signals from Banking Allocation Recommendations: Bank of America advised investors to allocate 1%-4% to digital assets. As a formal recommendation from a leading commercial bank, this not only represents recognition of the Crypto sector but will also influence a broader investor base.
• Significant Improvement in Liquidity Environment: The Federal Reserve officially confirmed the end of Quantitative Tightening (QT), halting the “drawing of water” from the market. This constitutes a major positive for the liquidity-constrained Crypto market, leading to a noticeable rebound in trading sentiment.

Policy Expectations and Regulatory Developments

• Regulatory Environment Tends to be Relaxed: SEC Chairman Paul Atkins announced that a cryptocurrency innovation exemption will be issued in approximately one month. This policy development further “loosens the reins” for the Crypto industry, promoting project innovation and development.
• Rate Cut Expectations Surge: The U.S. The November ADP employment report showed a decrease of 32,000 jobs, significantly lower than expected and the previous value. Market probability for a Federal Reserve rate cut at the December FOMC meeting has now surpassed 90%.
• Hawkish Stance from Bank of Japan Creates a Hedge: The Bank of Japan (BoJ) delivered hawkish remarks, and market expectation for a rate hike at their December 19th meeting has exceeded 90%. This is anticipated to withdraw liquidity from the market, striking a blow to positive sentiment.

Key Event Predictions for Next Week

• The Fed’s December Meeting Becomes the Focus: Although a rate cut is highly priced on the market, the key lies in Powell’s monetary policy press conference afterward. The market expects a strategy of “rate cut but hawkish rhetoric,” with the anticipated number of rate cuts in 2026 becoming the trading focus.
• Sustainability of Institutional Buying Power in Doubt: The buying momentum from BTC and ETH treasury companies and spot ETFs was modest this week, and its sustainability requires close monitoring. The release of liquidity after the U.S. government resumed operations still needs time to transmit, making institutional buying power a critical factor in determining market direction.
• Policy Transmission Lag Effect: Despite the improved policy environment, the actual transmission of liquidity to the market still requires time, limiting its practical support for the market in the short term.

Market Outlook

• Cautiously Optimistic but Maintaining Defense: Market sentiment has begun to recover, and the attitude of traditional financial institutions has turned positive. However, given the uncertainty of the Federal Reserve meeting and the sustainability of institutional buying power, investors should remain cautious.
• Focus on Policy Volatility Risk: The Fed’s December meeting and Powell’s statement will directly determine the market price direction. Any change in policy expectations could trigger violent fluctuations, and market participants will inevitably engage in intense speculation around these events.
• Guard Against Liquidity Reversal Risk: Institutional buying power often follows market trends. Under the influence of unfavorable data or policy signals, the market could quickly reverse from recovery to a decline. Investors should maintain a defensive posture and strictly control risk exposure to cope with potential sharp market declines caused by short-term risk aversion.

Bearish Targets for Next Week

MOVE, ME, LINEA

MOVE: Move Language L2 Project Faces Dual Crisis of Fundamental Collapse and Unlocking Sell Pressure

Project Fundamentals and Positioning

Movement is an Ethereum Layer 2 (L2) based on the Move programming language, aiming to introduce the security and performance of the Move language into various blockchain ecosystems, including Ethereum. It enhances the Ethereum network by building an L2 solution, improving transaction speed and efficiency while addressing scalability, interoperability, and security vulnerabilities.

Severe Deterioration in Fundamental Data

• Stablecoin Market Cap Continues to Shrink: On-chain stablecoin market cap has decreased from $67.09 million to $42.32 million in the past month, a drop of 36.92%. This indicates sustained capital outflow from the Movement ecosystem and continuously eroding market confidence.

• On-chain Activity Nearly Stalled: On-chain fee data shows Movement’s daily transaction fees are only around $2, an extremely low level, directly reflecting very limited on-chain activity.

• DEX Trading Volume Continues to Decline: On-chain DEX trading volume shows a sustained downward trend, currently only maintaining around $3.27 million/day. This indicates a constant decrease in on-chain trading activity.

• Extremely Low Ecosystem Project Revenue: The total daily revenue for all application projects on the Movement chain is only about $270 and continues to fall, showing the ecosystem is on the brink of decay.

• New User Acquisition Completely Stagnant: On-chain data indicates no new users have entered Movement recently, suggesting market interest in the project has dropped to a freezing point and user growth has completely stalled.

Token Unlocking Risk Assessment

• Unfavorable Unlocking Scale and Timing: 161.83 million MOVE tokens are scheduled to be unlocked on December 9th, accounting for 1.62% of the total locked supply, at a critical juncture when project fundamentals are continuously deteriorating.
• Severe Lack of Market Absorption Capacity: The average daily trading volume of the MOVE token is only about $600,000, clearly insufficient market liquidity to effectively absorb the upcoming unlocked token volume, which will create significant sell pressure.

• Strong Selling Motivation from Unlocking Recipients: Analysis of the linear unlocking schedule suggests that this unlock primarily involves investment institutions and the project team. Given the project’s current clear downward cycle, these holders have a strong incentive to realize profits and exit, making selling highly probable.
• Shallow Liquidity Depth: The relatively small daily trading volume reflects insufficient market depth, unable to effectively buffer the price impact caused by the token unlock.

Conclusion

The Movement project faces multiple systemic risks: on the business level, stablecoin market cap has shrunk by 36.92%, on-chain fees are only $2/day, DEX trading volume continues to decline, ecosystem revenue is merely $270/day, and new user acquisition has completely stalled. On the capital level, the impending unlock of 161.83 million MOVE tokens on December 9th will create significant sell pressure in a shallow liquidity market with an average daily trading volume of only $600,000. Furthermore, the unlocking entities are investment institutions and the team, who have a strong motivation to cash out. The superposition of multiple negative factors exerts sustained negative pressure on the MOVE token price, making a reversal of the downward trend unlikely in the short term.

ME: Trading Volume Near Zero Coupled with 4.9 Million Token Unlocks, Multiple Negatives Constitute Systemic Risk

Project Fundamentals and Positioning

Magic Eden is a multi-chain NFT marketplace initially built on the Solana blockchain, which has since expanded to platforms including Ethereum, Polygon, and Bitcoin. Magic Eden focuses on providing a user-friendly interface and low transaction fees, bringing dynamic cultural moments onto the blockchain, and enabling users to create, discover, and collect unique NFTs.

Severe Deterioration in Fundamental Data

• TVL Significantly Contracted: Magic Eden’s Total Value Locked (TVL) has further deteriorated from an initial $220,000 to $164,500, a drop of 25.22%. This reflects sustained outflow of user funds and a significant decline in project appeal and utilization.

• Trading Activity Collapsed: As a core metric for an NFT trading platform, Magic Eden’s on-chain trading volume has plummeted from a historical high of $8.75 million to currently only about $2,000, a staggering drop of 99.99%, virtually hitting zero. This indicates the platform has lost user activity, and its NFT trading function has essentially stalled.

• Worsening Capital Flow: Recently, Magic Eden’s on-chain funds have been in a state of net outflow, signaling a lack of user confidence in the platform and an accelerating withdrawal from the ecosystem.

Token Unlocking Risk Assessment

• Unfavorable Unlocking Scale and Timing: 4.9 million ME tokens are scheduled to be unlocked on December 10th. The timing of this unlock, occurring at a critical point of continuous deterioration in project fundamentals, poses a significant negative impact on the price.
• Severe Lack of Market Absorption Capacity: The average daily trading volume for the ME token is only about $400,000. Relative to the 4.9 million token unlock size, market liquidity is clearly insufficient to effectively absorb the new supply, which will create immense selling pressure.

• Strong Selling Motivation from Unlocking Recipients: Based on the linear unlocking schedule, this unlock primarily involves investment institutions and the project team. Given the project is currently in a clear downward cycle, these holders have a strong incentive to realize profits, making selling highly probable.
• Extremely Shallow Liquidity Depth: The average daily trading volume of $400,000 reflects a severe lack of market depth, completely incapable of cushioning the price impact brought by a large-scale token unlock.

Conclusion

Magic Eden faces systemic multiple negative pressures: on the business front, the core function of the NFT trading platform is virtually non-existent, with trading volume plummeting by 99.99% and TVL contracting by 25.22%; on the user front, on-chain funds continue to flow out, and user activity is close to zero; on the capital front, the 4.9 million token unlock on December 10th will create enormous selling pressure in the extremely thin liquidity of only $400,000 in average daily trading volume. The strong cash-out motivation of investment institutions and the team further amplifies the selling risk. The confluence of these negative factors constitutes a sustained and major negative pressure on the ME token price.

LINEA: Comprehensive L2 Ecosystem Contraction Coupled with 1.44 Billion Token Unlock, Multiple Negatives Co-trigger Systemic Risk

Project Fundamentals and Positioning

Linea is an Ethereum Layer 2 scaling solution designed to provide the Ethereum ecosystem with higher transaction throughput and lower transaction fees, while maintaining compatibility and security with the Ethereum mainnet.

Severe Deterioration in Fundamental Data

• Significant TVL Decrease: Linea’s Total Value Locked (TVL) has decreased from its peak of $1.683 billion to $314 million, a drop of 81.34%. This shows users are rapidly exiting Linea’s on-chain ecosystem.

• Rapid Stablecoin Market Cap Contraction: On-chain stablecoin market cap has decreased from $337 million to $61.91 million in just over a month, a decline of 81.62%. This indicates that on-chain capital is continuously being withdrawn from the Linea ecosystem.

• Marked Reduction in On-chain Activity: Linea’s on-chain fees have dropped to approximately $3,500 per day, indicating a rapid decrease in the number of users utilizing Linea.

• Sustained DEX Trading Volume Decline: On-chain DEX trading volume has been on a downward trend recently, decreasing from the previous $219 million/day to $12.25 million/day, a decline of 94.41%.

• Low Ecosystem Project Revenue: Revenue from applications on the Linea chain shows a rapid decline, with the total daily revenue for all projects being only about $53,000.

• Cliff-like Drop in Net Capital Inflow: On-chain net capital inflow has dropped from a peak of $130 million to $750,000, a massive decrease of 99.42%.

Token Unlocking Risk Assessment

• Unlocking Scale and Structure: 1.44 billion LINEA tokens are scheduled to be unlocked on December 10th, accounting for 2% of the total locked supply. Given the current limited market liquidity, this unlock will impose a significant shock on the market supply-demand balance.
• Unlocking Recipient Risk: According to the linear unlocking schedule, this unlock primarily involves investment institutions and the project team. These types of holders have a strong incentive and pressure to realize profits (cash out) amidst the deterioration of the project’s fundamentals.
• Severe Lack of Market Absorption Capacity: The average daily trading volume for the LINEA token is approximately $6 million. Relative to the unlocking scale, market liquidity is extremely scarce, making it difficult to effectively absorb the selling pressure resulting from the large increase in token supply.

Conclusion

Linea faces multiple superimposed systemic risks: on the fundamental level, TVL has dropped by 81.34%, stablecoin market cap has contracted by 81.62%, and net capital inflow has fallen by 99.42%, with all key indicators deteriorating comprehensively; on the liquidity level, the December 10th unlock of 1.44 billion tokens will create enormous selling pressure within the limited daily liquidity of $6 million. The resonance of these multiple negative factors forms a sustained negative impact on the LINEA token price, and the project faces severe survival challenges.

Token Unlock Schedule Next Week (Unlock Value > $1 Million)

Market Sentiment Index Analysis

Market Sentiment Index Rises from 30 to 35. BTC is up 2.33% WoW, ETH is up 5.75% WoW, and TOTAL3 is up 1.38% WoW. Altcoins are generally in the neutral range.

Hot Topic This Week

Ethereum’s Fusaka Upgrade: A Key Milestone Towards the Modular Blockchain

Introduction

On December 3, 2025, the Ethereum network successfully activated the upgrade named “Fusaka,” marking the second significant hard fork this year, following the “Pectra” upgrade in May. The name “Fusaka” is derived from the merging of the Execution Layer “Osaka” and the Consensus Layer “Fulu,” symbolizing the deep integration of Ethereum’s technical architecture.

The Fusaka upgrade marks a critical step forward in Ethereum’s scaling roadmap. By introducing PeerDAS technology and a flexible parameter adjustment mechanism, it lays the foundation for achieving the long-term goal of 100,000 transactions per second (TPS). This upgrade is not merely a technological breakthrough but also an important milestone in Ethereum’s transformation toward a modular blockchain architecture, which will profoundly impact the development trajectory of the entire Layer 2 ecosystem.

Event Background

Since “The Merge” in 2022, Ethereum has been steadily advancing along a clear roadmap. From the Merge achieving the proof-of-stake transition to Shapella enabling staking withdrawals, and then Dencun introducing blob data storage. Throughout this process, Ethereum adopted a “Rollup-centric” scaling strategy, transferring most transaction processing to Layer 2 networks while Layer 1 focuses on providing a secure settlement layer.

Currently, although Rollups carry most of Ethereum’s transaction volume and fee revenue, Layer 2 networks are still constrained by the capacity limits and cost pressures of publishing data to the Ethereum mainnet. While the blob mechanism introduced by the Dencun upgrade significantly reduced data publication costs, as Layer 2 usage continues to grow, data availability (DA) issues are becoming increasingly prominent, urgently demanding a more fundamental solution.

Content of the Fusaka Upgrade

Core Technological Innovation: PeerDAS Data Availability Sampling

Technical Principle and Mechanism

PeerDAS (Peer Data Availability Sampling) is the core technical breakthrough of the Fusaka upgrade, fundamentally redesigning Ethereum’s data verification architecture. In the traditional model, every Ethereum full node must download the entire blob data to verify the data blocks submitted by Rollups. This “full download” model severely limits the network’s data throughput capacity.

PeerDAS introduces the revolutionary concept of sharded verification: each blob data is split into multiple small fragments and dispersed across the network using erasure codes. Each validating node only needs to randomly download about 1/8 of the data fragments and can use cryptographic mathematical methods to ensure the availability and integrity of the entire dataset. This sampling verification mechanism is based on probability theory: if enough nodes in the network can provide random data fragments, it can be statistically assured that the complete data is available.

Capacity Increase and Resource Optimization

The most direct effect of PeerDAS is the theoretical achievement of an 8x increase in data capacity. This multiplier stems from the significant reduction in resource requirements for individual nodes: when each node only needs to process 1/8 of the data, the network as a whole can handle 8 times the data volume without increasing the burden on a single node. This design cleverly resolves the contradiction between scaling and decentralization, allowing ordinary validators to participate in larger-scale data verification without upgrading expensive hardware.

From a bandwidth perspective, PeerDAS drastically reduces the node’s download requirements but may increase upload pressure, as each node needs to provide the data fragments it stores to other nodes. This trade-off is generally favorable, as upload bandwidth is usually easier to scale than download bandwidth, and the distributed storage model improves data redundancy and reliability.

Flexible Scaling Mechanism: BPO Fork Innovation

The “Continuously Variable Transmission” Design Concept

The BPO (Blob-Only Parameter) fork mechanism introduced by EIP-7892 can be called Ethereum’s scaling “Continuously Variable Transmission (CVT) gearbox.” Before Fusaka, adjusting blob-related parameters required a full hard fork process, including an EIP proposal, multiple rounds of testing, community discussions, and network-wide coordination — a, the cycle that typically takes anywhere from 6 months to several years. The BPO fork decouples blob parameters from the protocol’s core code, making them configurable variables. This design allows Ethereum to adjust three key parameters — the target number of blobs, the maximum number of blobs, and the base fee adjustment factor — through smaller, specialized forks. The complexity and risk of these “mini-forks” are far lower than traditional hard forks, allowing them to be deployed more frequently.

The Economic Significance of Target and Max Parameters

The Target and Max parameters in the BPO mechanism have deep economic implications. The Target value determines the dynamic adjustment benchmark for blob fees: when actual usage exceeds the target value, fees increase to suppress demand; when usage is below the target value, fees decrease to stimulate demand. This mechanism ensures the efficient allocation of network resources.

The Max value serves as a safety “circuit breaker,” preventing the network from crashing due to overload. A 1.5x Target/Max ratio (e.g., 10/15, 14/21) provides the network with moderate elasticity, allowing it to handle demand peaks without exceeding technical capacity.

Performance and Security Optimization Measures

Comprehensive Upgrade of the Gas Mechanism

Fusaka introduces systematic optimization to Ethereum’s Gas mechanism. EIP-7825 restricts the amount of gas that can be used by a single transaction, preventing malicious transactions from consuming excessive resources and causing network congestion. This restriction mechanism acts like a “flow control valve,” ensuring the fair distribution of network resources.

The significant increase in the block Gas target value means each block can include more complex transactions, which significantly improves the execution efficiency of DeFi protocols, NFT marketplaces, and complex smart contracts. Concurrently, EIP-7934 raises the RLP block size limit to 10MB, providing more space for large transactions and batch operations.

Multi-layered Design for Security Protection

EIP-7823 and EIP-7883 reprice and impose restrictions on the MODEXP precompile, an important security improvement. MODEXP is a precompiled contract used for large numbers modular exponentiation, widely applied in cryptographic operations. Malicious attackers could construct computationally intensive MODEXP calls to consume vast computational resources, causing block validation delays or even network stagnation.

The new pricing mechanism significantly increases the cost of such attacks, while the restriction mechanism ensures that a single MODEXP call does not occupy excessive block space. This “double-insurance” design reflects Ethereum’s delicate balance between performance enhancement and security assurance.

User Experience and Developer Tool Upgrades

Native Support for Biometric Technology

EIP-7951 introduces the secp256r1 precompile, an improvement with profound implications. secp256r1 (also known as P-256) is an elliptic curve widely adopted by Apple Secure Enclave, Android Keystore, FIDO2, and WebAuthn. This means that Ethereum wallets can directly utilize the user device’s biometric functions (e.g., fingerprint, face recognition) for transaction signing without relying on traditional mnemonic phrases.

This improvement will significantly lower the barrier for ordinary users to interact with Ethereum. Users no longer need to memorize complex mnemonics or worry about losing private keys; instead, they can conduct blockchain transactions as easily as using a mobile banking app. This is crucial for the mass adoption of Ethereum.

Performance Optimization for Developer Tools

EIP-7939 introduces the “Count Leading Zeros Opcode,” which may sound highly technical but effectively solves a practical problem faced by developers. Counting the number of leading zeros in a 256-bit word is a common requirement for zero-knowledge proofs, large integer arithmetic, and bit-level math operations. Native opcode support drastically reduces the gas cost of these operations and significantly improves execution efficiency. This optimization is valuable for the development of zkRollups, privacy-preserving protocols, and high-performance DeFi applications, as it lowers the running costs of applications and enhances user experience.

Infrastructure for Pre-Confirmation Mechanism

EIP-7917 makes the validator schedule for the next epoch fully deterministic and queryable on-chain. This provides critical infrastructure for Layer 2 pre-confirmation mechanisms. Pre-confirmation allows users to receive “soft finality” assurance before a transaction is formally confirmed, significantly improving the transaction experience.

This deterministic scheduling mechanism allows Rollups to know in advance which validator will process a specific block, thereby providing faster and more reliable transaction confirmation. This is of significant value for high-frequency trading, gaming, and real-time application scenarios.

Impact and Significance of the Fusaka Upgrade

Comprehensive Upgrade of the Layer 2 Ecosystem

The Fusaka upgrade will bring about a fundamental transformation for the Layer 2 ecosystem. The expected 40%-60% reduction in data fees will directly lower the operating costs of Layer 2 projects, making high-frequency trading, gaming, social, and other application scenarios viable. This cost advantage will not only enhance the user experience of existing applications but will also give rise to entirely new business models and application types, driving the entire ecosystem’s shift from “value transfer” to “value creation.” Simultaneously, the reduction in the cost threshold will reshape the competitive landscape among Layer 2 projects, shifting the focus of competition from simple fee advantages to higher dimensions like user experience, technological innovation, and ecosystem development. This escalation of competition will promote the diversification of the entire Layer 2 ecosystem, providing more specialized solutions for different vertical fields.

Deep Optimization of Network Infrastructure

Through PeerDAS technology and the historical data expiration mechanism, the Fusaka upgrade significantly reduces the hardware requirements and sync time for node operation, shortening the sync time for new validators from several days to several hours. This optimization maintains decentralization while enhancing network performance, creating conditions for more individuals and small institutions to participate in network validation, further strengthening the network’s censorship resistance and global accessibility. While the upgrade may increase bandwidth requirements, the overall efficiency improvement and lowered entry barrier will attract more participants to the validator ecosystem. This diversification of participants will not only contribute to network decentralization but also provide users in developing countries and regions with the opportunity to participate in the global blockchain network.

Strategic Transformation Towards Modular Architecture

The Fusaka upgrade simultaneously advances the Surge, Verge, and Purge development paths for the first time, signaling Ethereum’s strategic shift from “feature-driven” to “value-driven.” This upgrade clarifies Ethereum’s positioning as a high-capacity settlement layer, achieving a clear separation of execution, data availability, and consensus through a modular architecture, offering a reference technical paradigm for the entire blockchain industry. More importantly, Fusaka lays the technical foundation for the 2026 Glamsterdam upgrade and the 100k TPS goal, validating the feasibility of the modular scaling path. The introduction of the BPO mechanism grants the network a “CVT” capability for flexible scaling, allowing capacity to be dynamically adjusted according to market demand, establishing sustainable technical architecture, and ushering in a new era for modular blockchains.

Conclusion

The Ethereum Fusaka upgrade represents a crucial turning point in blockchain technology development. Through the introduction of PeerDAS technology and the innovation of the BPO mechanism, it not only resolves the current data availability bottleneck faced by the Layer 2 ecosystem but also establishes a flexible and efficient scaling response mechanism. The successful implementation of this upgrade signifies the maturation of Ethereum’s technical architecture and the clarification of its development path. The profound significance of the upgrade lies in building a coherent, results-oriented scaling solution that drastically increases data processing capacity while maintaining decentralization. This paves the way for Ethereum to construct a modular blockchain ecosystem, enabling it to better fulfill its crucial role as the global settlement layer.

Sector Performance

Based on the week-over-week (WoW) returns, the Layer 1 (L1) sector performed the best, while the DePIN sector performed the worst.

• Layer1 Sector: In the Layer 1 sector, ETH, BNB, SOL, TRX, and ADA hold a larger proportion, totaling 99.22%. Their WoW change rates are 4.75%, 2.16%, 0.89%, 1.51%, and 3.92%, respectively. It can be seen that the projects in the Layer 1 sector recorded larger gains compared to projects in other sectors, thus making the Layer 1 sector the best performer.
• Depin Sector: In the DePIN sector, FIL, RENDER, IOTA, HNT, THETA, and AR hold a larger proportion, totaling 83.63%. Their WoW change rates are -3.46%, -2.63%, -13.92%, -7.35%, -5.38%, and 4.31%, respectively. It can be observed that the decline in most of the major projects in the DePIN sector was greater than in projects in other sectors, thus making the DePIN sector the worst performer.

Next Week’s Crypto Major Events Preview

Thursday (December 11): US Federal Reserve Interest Rate Decision (Upper Limit) as of December 10; Federal Reserve Chairman Powell’s monetary policy press conference; US Initial Jobless Claims as of December 6.

Summary

The cryptocurrency market showed a clear repair rebound this week, with BTC and ETH recording gains of 2.33% and 5.75%, respectively. The market sentiment index rebounded from 35 to 42, entering the neutral zone overall. The shift in stablecoin market capital flows is particularly noteworthy: the USDT market cap grew by 0.43% to $185.4 billion, continuing net capital inflow but on a smaller scale, reflecting that non-U.S. investors remain relatively cautious; in contrast, the USDC market cap saw a significant increase of 2.63% to $78.0 billion, with the increase reaching $2 billion, the largest capital inflow in the past month, signaling a positive re-entry signal from U.S. investors. The positive shift in institutional capital flows is the core driver of this rebound, with spot ETFs and treasury companies continuing their buying trend. This, combined with the attitude shift of traditional financial institutions (such as Vanguard allowing Bitcoin ETF trading and Bank of America recommending 1%-4% allocation to digital assets), as well as the Fed’s formal end to Quantitative Tightening, provided strong support for the repair of market sentiment.

Despite signs of a market rebound, investors must remain highly vigilant. While the probability of a rate cut at the upcoming December Federal Reserve meeting next week exceeds 90%, the key lies in Chairman Powell’s monetary policy press conference afterward. The market expects him to adopt a strategy of “rate cut but hawkish rhetoric,” with the anticipated number of rate cuts in 2026 becoming the trading focus. Of particular concern is the sustainability of institutional buying power, which remains in doubt; the buying momentum this week was relatively small, and the release of liquidity after the U.S. government resumed operations still requires time for transmission. Historical experience shows that institutional capital often follows market trends, and an unfavorable data point could quickly turn buying into selling, forming a negative feedback loop.

Considering the current market environment, it is recommended that investors adopt a cautiously optimistic but defensively focused strategy. Although market sentiment has begun to recover and the attitude of traditional financial institutions has turned positive, there is still a significant risk of short-term volatility due to the uncertainty of the Fed meeting and the lag effect of policy transmission. Investors should closely monitor next week’s Federal Reserve meeting and Powell’s speech, as these will directly determine the market price direction.