Geopolitics

The White House demands resolution of stablecoin yield disputes by the end of February, or market structure legislation will collapse. Banks estimate that in an extreme scenario, deposit outflows could reach $6.6 trillion, and Standard Chartered predicts a $500 billion outflow by 2028. The core controversy: whether exchanges can offer rewards for stablecoins. Banks advocate banning anti-volatility savings products, while Coinbase states that Congress retains the authority to grant third-party rewards. A three-way compromise: activity rewards, reserve deposits into community banks, and retail bans on institutional access.

Telegram founder Durov warns that Spain's online age verification law will eliminate anonymity and turn the country into a surveillance state. Spanish Prime Minister Sánchez announced at the Dubai summit to restrict social media use for those under 16, stating "Social media has become a failed state, take back control to protect children." Critics believe this is control rather than protection. Concordium CEO suggests using blockchain zero-knowledge proofs to verify age without revealing identity.

U.S. Treasury Secretary Janet Yellen was questioned by the House of Representatives on Wednesday, focusing on the conflict of interest between Trump WLFI and the United Arab Emirates. The Wall Street Journal reported that before Trump's inauguration, the UAE secretly invested $500 million to acquire a 49% stake in WLFI. Lawmakers called for a suspension of WLFI's banking license and questioned whether Yellen has the authority to "rescue Bitcoin." Yellen explicitly responded that neither the U.S. Treasury nor the Financial Stability Oversight Council has such authority.

Trump and allies raise $429 million, setting a record, with Maga PAC holding $304 million. The biggest donor, Crypto.com, donates $30 million; OpenAI's Brockman contributes $12.5 million; A16Z founders each donate $3 million. The crypto industry and Silicon Valley are investing heavily to gain regulatory relief, especially in crypto legislation and opposition to state-level AI regulation. The funds may be used for midterm elections or to maintain influence after leaving office.

Trump nominates Kevin Wash as Federal Reserve Chair. Wash criticizes long-term tightening policies, and market expectations shift towards easing. CME FedWatch shows a 46% chance of rate cuts at the first meeting. Market confidence rebounds, stocks rise first, followed by cryptocurrencies. Bitcoin reacts strongly to liquidity expectations, and altcoins respond even more quickly.

The U.S. Department of Justice releases Jeffrey Epstein files, revealing 9 cryptocurrency figures. Thiel was invested $40 million and invited to visit islands, Musk's SolarCity powered the islands and inquired about parties, Tether founder Pierce communicated multiple times and admitted Epstein was the one who introduced him to cryptocurrencies, Saylor appeared indirectly through a third party. Most clarifications indicate no illegal activity, but only 3.5 million pages have been released, raising questions about covering up the truth.

France raids X Paris headquarters, investigates child abuse images, AI deepfakes, and Holocaust denial content, summons Musk for questioning on April 20. Telegram founder Durov criticizes "France is the only country to criminally persecute social networks that promote freedom," condemning the use of child protection as a pretext for censorship. Grok has been blocked by Malaysia and Indonesia due to generating pornographic deepfakes, and the EU has fined 120 million euros.

The House of Representatives passed a $1.2 trillion funding bill with a vote of 217:214, ending the four-day crisis of the Trump administration shutdown. Trump is expected to sign the bill to reopen the government. Bitcoin was slightly boosted by the news, rising to around $76,000, but has not yet fully shaken off its sluggish trend. The Senate's Digital Asset Market Structure Act is stalled due to Coinbase withdrawing support.

The Department of Justice releases Epstein documents, with a 2014 file mentioning Jed McCaleb's "Secret Bitcoin Plan" sparking controversy. Some believe it involves Ripple surveillance, but analysts point to Stellar. Blockstream founder's email urges to stop funding, Ripple's CTO denies direct contact.

Market prediction betting on BlackRock CIO Rick Rieder becoming Federal Reserve Chair shows a 45% probability on Polymarket. Trump at Davos called him "excellent," suggesting "there might only be one left." Hassett's reappointment to NEC drops to 8%. Trump hopes rate cuts will benefit cryptocurrencies, but pressure on Fed independence may increase volatility.

The Federal Reserve will hold a meeting on January 27-28, with CME showing a 95.6% probability of maintaining interest rates. November PCE inflation was 2.8%, well above the 2% target, making a pause in rate cuts a certainty. Bitcoin fluctuated between 80,000 and 90,000 USD, down 7.3% for the week, with no gains for the year, contrasting with gold reaching new highs. Trump threatened to impose 100% tariffs on Canada. AI stocks sold off, with META down 12.4% and NVIDIA down 9.5%.

The Japanese Yen experienced its largest single-day increase since June, soaring from 160 to 155.6. The Prime Minister warned of "abnormal fluctuations." The New York Fed and major banks are communicating, which is usually a sign of coordinated intervention. The 1985 Plaza Accord showed that joint US-Japan efforts could stabilize the Yen, weaken the US dollar, and boost assets. However, short-term risks include arbitrage unwinding, as the Bank of Japan's rate hike in August 2024 triggered Bitcoin to plummet from 64,000 to 49,000 USD, evaporating 15 billion.

White House Chief of Staff Hassett stated that Trump hopes he will remain, and the market interpreted this as a withdrawal from the Federal Reserve Chair race. The forecast market quickly adjusted, with Waller's probability soaring to 60%, Hassett dropping to 15-16%, and Waller around 13-14%. Waller led for the first time, but Trump's style is unpredictable. Powell's term ends on May 15.

Treasury Secretary Yellen told Trump that the Fed investigation into Powell has "made a mess" and could impact financial markets. Prosecutor Jeanine Pirro has initiated an investigation but has not informed the Treasury Department, White House, or Department of Justice. Yellen believed that Powell would leave when a new chair is appointed, but now his stance is more hardline, making it impossible to relinquish power. Smart money holds a net short position of $127 million in Bitcoin, and sentiment indicators show the market is building a bottom.

Trump announces a $200 billion mortgage-backed securities purchase plan, with Fannie Mae and Freddie Mac each buying $100 billion, without congressional approval. The goal is to reduce mortgage rates by 6.16%. Similar to the 2008 QE but led by the President rather than the central bank. The housing crisis has severely damaged approval ratings, and although the Federal Reserve cut interest rates by 75 basis points, mortgage rates remain high.

The Federal Reserve and the market have a serious divergence in the interest rate outlook for 2026. The market expects 2 to 3 rate cuts (Polymarket shows a 94% chance of a rate cut in June), but the Federal Reserve has only hinted at one rate cut. Trump's push for rate cuts was countered by inflation, causing economic policy approval ratings to drop to 36%. As the midterm elections approach, it has fallen into an impossible triangle of rate cuts, inflation, and elections.