12.9 AI Daily Report: Cryptocurrency Market Turbulence, Global Regulatory Tightening Continues

I. Top Stories

1. Fed Chair Powell Sends Hawkish Signal, Bitcoin Plunges Over 5%

Federal Reserve Chair Jerome Powell stated in his speech at the Brookings Institution on Tuesday that the path to rate cuts may be higher than previously expected. He emphasized that inflation data remains elevated, the labor market is still too tight, and further rate hikes are needed to achieve the 2% inflation target. Powell’s hawkish comments heightened market expectations for rate hikes next year, and Bitcoin immediately plunged 5.4%, falling below the $17,000 mark.

Powell’s remarks have sparked speculation about the Fed’s rate hike in December. Analysts believe Powell’s language was firm and hawkish, suggesting the Fed may raise rates by 50 basis points in December. This would hit risk assets, and cryptocurrencies may face greater selling pressure. Meanwhile, the dollar index climbed, adding further pressure due to risk-off sentiment. Investors’ concerns about a global economic recession have intensified, and it is expected that crypto market volatility will continue to expand in the near future.

2. Japan Plans 20% Flat Tax on Cryptocurrency Trading

The Japanese government is moving to adjust its tax policy on cryptocurrency trading gains, planning to impose a flat 20% income tax rate regardless of transaction amount, giving crypto the same treatment as stocks and investment trusts. The move aims to ease investors’ tax burdens and activate the domestic trading market.

Currently, Japan taxes crypto trading gains as comprehensive income, combining it with salary and other business income and applying a progressive tax rate, with a maximum rate of up to 55%. The new policy will adopt a separate taxation method, no longer combining crypto trading income with other income.

Analysts point out that this will bring new vitality to Japan’s crypto market. A unified 20% tax rate will attract more investors and boost trading activity. It will also encourage innovation in crypto products and services, injecting new momentum into the industry. However, some believe that an overly low tax rate may bring speculative trading risks and requires corresponding regulatory policies for oversight.

3. Hong Kong SFC Approves First Stablecoin-Related Fund Listing

The Hong Kong Securities and Futures Commission ( SFC ) has approved the first public fund product involving stablecoins, the “Ying Fu Stablecoin Fund,” launched by Ying Fu Fund Management Company, for listing and trading in Hong Kong. This is the first time Hong Kong has approved a public fund product involving stablecoins.

The fund mainly invests in stablecoins issued by issuers recognized by regulators and stores them with regulated custodians. The fund’s investment objective is to minimize the difference between its net asset value per share and the US dollar.

Analysts say the SFC’s approval of this fund marks Hong Kong’s formal inclusion of stablecoins in its regulatory framework, which is beneficial for Hong Kong’s development as a virtual asset center. It also reflects regulators’ recognition of the prospects for stablecoins. In the future, more stablecoin-related products may be listed in Hong Kong, providing investors with more diversified investment options.

4. EU Regulators Call for Stronger Cryptocurrency Oversight

The European Banking Authority ( EBA ) and the European Securities and Markets Authority ( ESMA ) recently released a joint report calling for the EU to strengthen oversight of crypto assets. The report notes that the rapid development of the crypto asset market has brought new risks, and the current regulatory framework can no longer effectively control them.

The report recommends that the EU establish a unified crypto asset regulatory framework, clarify the responsibilities of regulatory agencies, and strengthen cross-border regulatory cooperation. It also calls for stronger regulation of stablecoins to prevent shocks to the traditional financial system.

Analysts believe that fragmented and uncoordinated crypto asset regulation has long been a bottleneck for industry development. The introduction of a unified EU regulatory framework will benefit the healthy development of Europe’s crypto asset market, increase transparency, and protect investor rights. Some, however, worry that excessive regulation could stifle innovation and that a balance must be struck between safety and development.

5. America’s Largest Pension Fund CalPERS Invests in Cryptocurrency

The California Public Employees’ Retirement System ( CalPERS ) has revealed that it has invested in cryptocurrencies and digital assets through third parties. This is the first public acknowledgment of crypto investments by the largest public pension fund in the US.

CalPERS said that it invests in crypto indirectly through partner funds to diversify its portfolio and capture potential returns from emerging industries. However, the specific investment amount and types of crypto assets have not been disclosed.

Analysts note that CalPERS’ move reflects growing institutional recognition of crypto assets. As one of the world’s largest pension funds, CalPERS’ actions may lead more institutional capital to the crypto market. At the same time, it also highlights the urgent need for crypto regulation to protect institutional investors’ rights.

II. Industry News

1. Bitcoin Price Briefly Drops Below $88,000, Market Panic Spreads

On December 1, the price of Bitcoin briefly fell below the $88,000 mark, with an intraday low of $86,317. Analysts point out that this round of decline was mainly triggered by Bank of Japan Governor Kazuo Ueda signaling rate hikes, causing widespread declines in Asia-Pacific stock markets. Meanwhile, Trump announced he had finalized his pick for Fed Chair, increasing uncertainty over interest rate policy.

The sharp drop in Bitcoin’s price has caused panic among investors. According to the Crypto Fear & Greed Index, current market sentiment is in the “extreme fear” zone. Trading volume data also shows significant capital outflows in the past 24 hours. Analysts believe Bitcoin has strong short-term downward momentum and will watch for support in the $88,600 to $89,000 range. Failure to recover this area may lead to further declines.

On the other hand, some analysts remain optimistic about Bitcoin’s mid-term outlook. They believe factors such as slowing US inflation data and the Fed potentially turning dovish could bring rebound opportunities for Bitcoin, but only if the macro environment becomes clearer. In summary, Bitcoin faces short-term downward pressure, and investors should remain cautious and closely watch fundamentals and policy trends.

2. Ethereum Takes a Hit, DeFi Ecosystem Impacted

Ethereum also suffered a significant drop on December 1, with intraday lows near $2,800. Meanwhile, the DeFi ecosystem was hit hard, with major DeFi tokens seeing steep declines.

Analysts say Ethereum’s crash was mainly due to deteriorating macro conditions. The Bank of Japan’s rate hike signal and increased uncertainty over Fed policy led to a sell-off in risk assets. At the same time, DeFi protocol Yearn suffered a hacker attack, with about $3 million stolen, further undermining investor confidence.

The price drop led to a decline in DeFi ecosystem activity and total value locked ( TVL ). Data shows DeFi TVL fell about 3% in the past 24 hours. Analysts note that DeFi is heavily dependent on Ethereum, and sharp price swings in ETH inevitably trigger knock-on effects in DeFi.

However, some analysts remain optimistic about DeFi’s long-term prospects. They believe that as the Ethereum network upgrade progresses, DeFi will enjoy a better development environment. Clearer regulatory policies will also bring certainty to DeFi, attracting more institutional capital.

3. Altcoin Market Diverges, Some Tokens Surge Against the Trend

Unlike major cryptocurrencies, the altcoin market saw diverging trends on December 1. Some popular altcoins surged against the trend, while others fell sharply.

Data shows that popular meme tokens such as MemeCore and SoSoValue rose 7.15% and 8.43% respectively in the past 24 hours. Analysts believe these gains are mainly driven by speculation and lack fundamental support.

Meanwhile, privacy coins like Zcash saw significant declines. Analysts warn that Zcash could fall further to the $200 mark in the coming weeks. The drop in privacy coins may be related to increased regulatory pressure.

Overall, the divergence in the altcoin market reflects the complexity of investor sentiment. In a worsening macro environment, some investors are fleeing to meme tokens seen as “safe havens,” while others are cautious about the outlook for privacy coins. Analysts caution that the high volatility of the altcoin market means high risks, and investors should make prudent decisions.

III. Project News

1. Sui Network: Rising Star in the Move Ecosystem, Mainnet Launch Draws Attention

Sui Network is a new layer-1 blockchain built by a team of engineers who previously participated in the Diem project. It uses the Move programming language and a brand-new execution engine, aiming to deliver high throughput, low latency, and high composability.

On April 27, the Sui mainnet officially launched. Since then, the Sui ecosystem has grown rapidly, with multiple DeFi, NFT, and GameFi projects joining. Clover, the first decentralized exchange on Sui, has attracted a large number of users and liquidity. Sui has also launched the SuiPlay gaming platform, providing infrastructure support for game developers.

Sui’s emergence has brought new energy to the Move ecosystem. Move is considered a next-generation smart contract language with innovative features like its resource model. The Sui mainnet launch is expected to drive broader adoption of Move and promote the development of the Move ecosystem.

Industry analysts believe the Sui mainnet launch marks the Move ecosystem’s entry into real-world application. In the future, Sui will face major challenges in ecosystem building and user growth, but if it leverages the advantages of Move, Sui could become a strong contender among next-generation smart contract platforms.

2. Aptos: Metaverse Rising Star, NFT Trading Volume Surges

Aptos is a layer-1 blockchain using the Move language, founded by former Meta employees. With excellent performance, Aptos is seen as key infrastructure for the Metaverse and Web3 era.

Recently, NFT trading volume on Aptos has exploded. Data shows that in November, Aptos NFT trading volume exceeded $150 million, up over 400% month-over-month. The most popular NFT project on Aptos, Topaz, has surpassed $100 million in total sales.

The surge in Aptos NFT trading volume is mainly due to its outstanding performance and low fees. Compared with Ethereum, Aptos offers faster transaction speeds and lower costs, delivering a better trading experience for NFTs. The Aptos ecosystem is also developing rapidly, with multiple NFT marketplaces and gaming projects emerging.

Analysts believe Aptos is poised to become key infrastructure for NFTs and the Metaverse. Going forward, Aptos needs to continue improving performance and promote more use cases to truly establish itself as a leader in NFTs and the Metaverse.

3. Gensyn: AI + Web3, Ushering in a New Era of Computing

Gensyn is a Web3-based distributed computing platform that leverages AI and blockchain technology to provide users with efficient, secure, and privacy-friendly computing services.

Recently, Gensyn completed its first round of financing and launched its testnet. In the testnet, users can stake tokens to access computing resources and distribute computing tasks to nodes worldwide. Gensyn uses privacy computing technology to ensure user data is not leaked during computation.

Gensyn’s emergence is expected to drive decentralization and democratization of AI computing. Traditional AI computing platforms face issues like data privacy and compute power monopolies. Gensyn, through blockchain and privacy computing, offers secure, efficient, and fair computing services.

Industry analysts believe Gensyn represents the future trend of AI and Web3 integration. Going forward, Gensyn needs to expand its node network, optimize algorithm performance, and launch more use cases to truly democratize AI computing.

4. Hyperbolic: Distributed Computing Rising Star, First Application Launched

Hyperbolic is a distributed computing platform based on Solana, aiming to use blockchain technology to build efficient, secure, and scalable computing infrastructure.

Recently, Hyperbolic launched its first application, Hyperbolic Compute, for distributed computing services. Users can deploy computing tasks on Hyperbolic Compute, which are distributed to nodes worldwide and support GPU-accelerated computing.

Hyperbolic uses an innovative incentive mechanism, rewarding participating nodes with tokens. It also incorporates trusted execution environments and other technologies to ensure privacy and security during computation.

Analysts believe Hyperbolic represents the future trend of blockchain computing. Compared to traditional cloud computing, Hyperbolic offers greater performance, lower costs, and better privacy protection. Going forward, Hyperbolic needs to continuously optimize its technology and expand use cases to truly become foundational distributed computing infrastructure.

5. Schelling AI: AI + Web3 Rising Star, Launches First Application

Schelling AI is an innovative company focused on combining AI and Web3, aiming to build a decentralized AI ecosystem using blockchain technology.

Recently, Schelling AI launched its first application, Schelling Compute, for distributed AI computing services. Users can deploy AI models and datasets on Schelling Compute, which distributes tasks to nodes globally and supports GPU acceleration.

Schelling Compute uses an innovative incentive mechanism, rewarding nodes with tokens. Schelling AI also leverages privacy computing and other technologies to ensure the privacy and security of the computing process.

Analysts believe Schelling AI represents the future trend of AI and Web3 integration. Compared to traditional AI computing platforms, Schelling AI offers better privacy protection, higher security, and greater scalability. Looking ahead, Schelling AI needs to continually optimize its technology and expand use cases to truly become foundational infrastructure for AI computing.

IV. Economic Developments

1. Fed Slows Rate Hikes, Inflation Pressure Persists

The US economy faced a challenging year in 2025. Despite relatively strong GDP growth in the first half, persistent high inflation put heavy pressure on consumers and businesses. According to the latest data, the core Personal Consumption Expenditures Price Index ( PCE ) rose 5.1% year-on-year in November, higher than market expectations, showing inflation pressures remain unresolved.

At the November Federal Open Market Committee ( FOMC ) meeting, the Fed decided to raise rates by another 25 basis points, bringing the target federal funds rate range to 4.75%-5%. This marked the Fed’s eighth consecutive rate hike, but the pace has slowed. Fed Chair Powell stated at the press conference that although the inflation data is “disappointing,” economic activity is slowing moderately, and the labor market has cooled, creating conditions for lower inflation.

Markets reacted calmly to the Fed’s decision. Investors expect that as inflation gradually eases, the Fed will end its rate hike cycle in the first half of 2026. However, high inflation and tight monetary policy may continue to weigh on the economy.

Goldman Sachs Chief Economist Jan Hartley said: “Although the Fed has slowed its rate hikes, the process of lowering inflation may be slower and more volatile than expected. It may take time for business and consumer expectations to adjust, potentially delaying the Fed’s achievement of the 2% inflation target.”

2. China’s Economic Recovery Accelerates, Policy Support Continues

After a period of weakness in 2025, China’s economy began to show signs of recovery toward year-end. The latest data show that China’s manufacturing Purchasing Managers’ Index ( PMI ) was 51.8 in November, marking the third consecutive month in expansion territory, reflecting a continued rebound in manufacturing activity.

To address economic headwinds, China’s government has rolled out a series of supportive measures, including tax cuts, increased infrastructure investment, and greater financial support for the real economy. At the December Central Economic Work Conference, policymakers emphasized that 2026 would feature “comprehensive deepening of reform and opening up” and “maintaining continuity in macro policies.”

Market participants believe China’s economic recovery may accelerate further in 2026. CICC Chief Economist He Xuzhao said: “As the impact of the pandemic fades, household consumption is expected to continue improving, and manufacturing investment will gradually stabilize and recover. Meanwhile, infrastructure investment and exports will likely remain strong with policy support. China’s GDP growth is expected to rebound to around 6% in 2026.”

However, some analysts caution that downside risks remain. Goldman Sachs Asia economist Su Zhenhua noted that persistent weakness in real estate, high local government debt, and an aging population will continue to restrain China’s medium- and long-term growth potential.

3. ECB Tightens Policy, Recession Risks Intensify

With inflation remaining high, the European Central Bank (ECB) took more aggressive monetary tightening measures in 2025. On December 15, the ECB raised its three key interest rates by 50 basis points—the fifth consecutive hike and the largest single increase since 2011.

ECB President Christine Lagarde said at a press conference that while rate hikes will negatively affect the economy, curbing inflation remains the top priority. She emphasized that the ECB will continue raising rates until inflation is back at the 2% target.

Market participants had mixed reactions to the ECB’s decision. Some analysts believe the ECB’s “super-sized” rate hike will heighten the risk of recession in the eurozone. Deutsche Bank Chief Eurozone Economist David Fox said: “Although inflation remains high, the ECB’s aggressive stance may result in a hard landing for the economy.”

However, other analysts believe the ECB’s decisive action will help prevent inflation expectations from rising further. Goldman Sachs Europe economist George Saravos said: “While recession risks have indeed increased, the ECB’s tightening policy will help reshape inflation expectations and lay the foundation for economic recovery in coming years.”

V. Regulation & Policies

1. US Senate Passes Comprehensive Crypto Regulation Bill

The US Senate recently passed a comprehensive crypto regulation bill. The bill, co-sponsored by Senators Lummis and Gillibrand, aims to establish a broad regulatory framework for the cryptocurrency industry.

Key provisions include bringing cryptocurrencies under the oversight of the Commodity Futures Trading Commission ( CFTC ) and granting the CFTC authority over crypto spot markets; requiring crypto exchanges and stablecoin issuers to obtain federal licenses; setting energy usage disclosure requirements for crypto mining; and specifying crypto tax treatment with guidance for consumer protection and anti-money laundering.

The bill is intended to create unified regulatory standards for the rapidly growing crypto sector, enhance regulatory transparency, and protect investor rights. It also provides a clear compliance path for crypto companies.

Industry insiders have generally welcomed the bill. Coinbase CEO Brian Armstrong ( Brian Armstrong ) called it an important milestone that will bring needed regulatory clarity to the industry. However, some experts note that the bill could raise compliance costs for crypto firms and restrict innovation.

2. UK Financial Conduct Authority Releases Crypto Asset Regulation Consultation

The UK Financial Conduct Authority ( FCA ) recently released a consultation paper on a crypto asset regulatory framework, aiming to establish reasonable and appropriate regulation for crypto assets.

The consultation proposes several measures, including requiring crypto asset issuers and service providers to undergo FCA review and supervision; setting operational standards for crypto exchanges and custodians; strengthening AML/CFT compliance requirements; and providing appropriate protection for crypto investors.

The FCA said the rapid development of the crypto asset market brings new risks and challenges, necessitating the establishment of a suitable regulatory framework. The framework aims to promote orderly market development, protect consumers, and maintain financial stability.

The crypto industry has welcomed the move. The head of Coinbase UK said reasonable regulation will help the long-term growth of the crypto industry. However, some in the industry worry that excessive regulation could stifle innovation.

The Financial Times’ crypto columnist noted that the UK’s regulatory direction will influence policies in other European countries, making the consultation’s outcome highly significant for Europe’s crypto industry.

3. Singapore MAS Issues Digital Token Payment Service Regulatory Guidelines

The Monetary Authority of Singapore ( MAS ) recently released regulatory guidelines for digital token payment services, clarifying requirements for digital token payment service providers.

The guidelines require all companies offering such services to obtain MAS licenses and comply with anti-money laundering and counter-terrorism financing rules. They also set specific requirements for risk management, technical systems, and client asset protection.

MAS stated that digital token payment services are developing rapidly and bring new opportunities and risks for consumers and investors. The guidelines are intended to promote orderly development of Singapore’s digital token payment sector, protect consumers, and guard against money laundering and terrorist financing risks.

Singapore crypto companies have welcomed the move. Crypto.com CEO Kris Marszalek ( Kris Marszalek ) said clear regulation will help the crypto industry grow and boost public confidence in cryptocurrencies.

However, some in the industry worry that overly strict regulation could stifle innovation and weaken Singapore’s competitiveness as a global crypto hub.

Experts believe Singapore’s regulatory direction will influence crypto regulation throughout Southeast Asia, making the new guidelines regionally significant.