Fiat Fracture – Bitcoin Delivers

Fiat Fracture

Last week we stated that we expect the crypto bull market to accelerate in the final quarter of the year. Bitcoin delivered on expectations and rose over 10% in a week, pulling the rest of the digital asset class upward with it.

Macroeconomic drivers support Bitcoin and other risk assets: the global rate-cutting cycle, moderate economic growth, fiscal stimulus, rising global liquidity, and a weakening dollar are easing financial conditions.

Crypto markets have, however, moved in a narrow and sometimes frustrating sideways pattern for a long time. This is partly due to so-called "whale selling" absorption, although ETF flows and corporate digital asset balance sheet acquisitions (DATs) continue strongly. Liquidity has also been drained by the US Treasury General Account rebuilding after the debt ceiling raise.

Last week Bitcoin tested Q3 lows, and we expected a small correction before the rise. However, the market started the final quarter of the year strongly, possibly in anticipation of a US government shutdown.

Bitcoin's Predictability Stands Out

Political uncertainty in the US highlights Bitcoin's stability and reliability as a decentralized, non-state network that never shuts down. According to FRNT Financial, more distributed mining hashrate increases Bitcoin's position as a safe haven.

While Bitcoin remains a high-risk asset, it acts both as a reflection of overheated liquidity flows and as protection against economic and systemic risks.

The US government shutdown is yet another reminder of the fragility of the dollar-based system and the sustainability problems of fiat currencies based on continuous debt growth. Politicians' short-sighted decision-making focused on re-election ultimately leads to new spending programs.

Labor Markets Signal Softening

Due to the government shutdown, key labor market data releases were not seen, including Non-Farm Payrolls figures. This data gap likely reinforces market expectations of rate cuts in the coming months.

Available data supports this view. The JOLTS report showed new hires down by 114,000 and the quit rate falling to 1.9%, a level not often seen. The ADP report showed jobs down by 32,000, despite forecasts of 51,000 additions.

As the labor market weakens, rate cuts remain likely.

As US rates and the dollar fell, risk assets also rose. Stocks rose broadly, especially the technology sector.

Oil prices fell over 7% as OPEC+ announced production increases in November. Cheaper oil eases inflation pressures and facilitates central bank liquidity policy.

Debasement Trade Strengthens

Throughout the year we've repeated one theme: gradual fiat currency weakening, or "debasement," drives long-term growth in Bitcoin and other real values like gold.

Even JP Morgan now acknowledged this phenomenon as structural, not passing. Both gold and Bitcoin are gaining importance in investors' portfolios as protection against currency base weakening.

We're at a turning point where growth requires ever larger deficits and central banks must push rates down to maintain financial system stability. Donald Trump has repeatedly expressed his desire to "grow out of debt" and hinted at new direct support checks for citizens.

Gold and Bitcoin offer protection against the weakening dollar and other fiat currencies. Most of the market still doesn't understand that this isn't just about rising asset prices – it's about the measuring unit (currency) weakening.

As one commentator put it: "This is not a normal market cycle. We are in a transition phase toward a new unit of value."

Crypto-Native News

Tether announced a partnership with video platform Rumble to promote the use of US-regulated USAT stablecoin. Rumble plans to launch a crypto wallet later this year supporting USAT and other tokens.

Samsung and Coinbase announced a partnership enabling Galaxy device users to benefit from Coinbase One directly through Samsung Wallet. This offers crypto trading without separate apps and enables payments directly with crypto assets.

Société Générale's SG Forge integrated euro- and dollar-based stablecoins into the Uniswap exchange and Morpho lending platform, enabling direct swaps and collateralized loans for bank customers. Learn more about getting started with DeFi services.

Stripe announced a stablecoin issuance platform enabling businesses to create their own stablecoins with just a few lines of code. The first token through the platform is Phantom wallet's CASH token.

Institutional News

SEC and CFTC announced closer cooperation in crypto markets. The goal is to simplify regulation and reduce overlaps that have caused delays and confusion for operators.

CME Group announced that its crypto futures will transition to 24/7 trading by Q1 2026. This aligns CME with always-on crypto markets. Bitcoin and Ethereum futures will be tradeable around the clock.

Kazakhstan established the first national crypto reserve fund, "Alem Crypto Fund," in partnership with Binance. The fund invests in Bitcoin and other digital assets as part of the country's reserve assets. This is part of the broader development where countries diversify their reserves with digital assets.

Coinbase is applying for a US banking license, which would allow it to offer traditional banking services, including deposits and loans, alongside crypto services. If approved, this would make Coinbase one of the first crypto-native banks in the United States.

Robinhood is expanding into global prediction markets, following in the footsteps of Polymarket's success. Users can place bets on various political, sports, and entertainment events. This is an interesting development where traditional investment platforms embrace decentralized prediction mechanisms.