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The Bank of Japan's decision to raise its benchmark borrowing cost to the highest level in 17 years, coupled with an upward revision of inflation forecasts, did not significantly impact Bitcoin or other risk assets during Friday's Asian trading session. The Japanese yen appreciated against the U.S. dollar following the announcement, but Bitcoin traded flat above $104,000, indicating market resilience. This stability might be attributed to the market's anticipation of policy shifts under Donald Trump's presidency, especially after he signed an executive order banning digital dollars and promoting innovation in cryptocurrency and AI. Additionally, recent U.S. economic data showed a slower increase in the "all tenant rent" index, which could influence the Federal Reserve's future rate decisions, potentially leading to a less hawkish stance than previously forecasted.
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In response to U.S. President Donald Trump's push to promote dollar-backed stablecoins globally, European Central Bank (ECB) board member Piero Cipollone emphasized the necessity for a digital euro. Trump's strategy, outlined in an executive order, aims to expand the use of stablecoins, which are cryptocurrencies pegged to the U.S. dollar, potentially drawing customers away from traditional banking systems. Cipollone argued that this move would further disintermediate banks, reducing their revenue from fees and client base. A digital euro, he suggested, would serve as an ECB-guaranteed online wallet, allowing even unbanked individuals to make payments, with holdings likely capped at a few thousand euros. This initiative comes amidst concerns from banks about potential deposit outflows to the safety of an ECB-backed digital wallet. The ECB is currently exploring the practicalities of a digital euro, with a final decision pending legislative approval. Meanwhile, several countries have already launched their digital currencies, with many others, including major economies like China and Russia, conducting pilot programs.
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Donald Trump's official memecoin has shown a stark contrast in profitability between early investors and the general retail market. According to Chainalysis, while 60 influential token holders, or "whales," have each realized profits over $10 million, the majority of retail investors are at break-even or hold less than $100 worth of tokens. The memecoin, launched before Trump's swearing-in ceremony, saw its price surge from a few cents to $14 within hours, attracting $3 billion in trading volume and netting early buyers over $70 million in paper gains. However, the distribution of wealth is uneven, with 94% of the tokens held by just 40 whales. Despite attracting new investors to the Solana blockchain, the initial excitement has waned, with recent price drops indicating a cooling of interest in these tokens.
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JPMorgan's recent research report suggests a potential recovery in crypto venture capital (VC) funding in 2024, driven by clearer regulatory frameworks and more favorable policies under President Trump's administration. The report highlights that the enforcement actions by the SEC and regulatory uncertainty in previous years had subdued VC funding in the crypto sector. The introduction of the EU's MiCA regulations is expected to further encourage VC engagement. However, the funding levels are not anticipated to reach the highs of 2021/22 due to several challenges. Traditional finance giants are increasingly entering the crypto market, reducing the market share available for VC firms in areas like stablecoins and DeFi. Additionally, new crypto projects are opting for community-driven fundraising over traditional VC token sales, and high interest rates along with the rise of crypto ETFs are diverting capital away from VC investments.
