Bitfinex Alpha #192 | BTC Stabilises as Early Signs of Optimism Emerge

BTCSTABILISES ASEARLYSIGNSOF OPTIMISMEMERGE

BitcoinAttemptsRecoveryAmidstFavourable MacroBackdrop

USIn ationCoolsInJanuaryBut

UnderlyingPressuresPersist

EXECUTIVESUMMARY

Bitcoin is attempting to stabilise after the 5 February capitulation event, which drove the price to a local low of $60,100. The macro backdrop has turned constructive.HeadlineCPIcooledtobelowexpectations,reinforcingthenarrative that disinflation is gaining traction. Treasury yields declined, the dollar softened, and rate markets repriced toward three potential cuts in 2026, with April increasingly favoured for the first move. For non-yielding assets such as Bitcoin, thisshiftinrealyieldexpectationsreducesmacroheadwinds.

Derivatives positioning supports the view that the recent bounce is a stabilisation phase rather than a leverage-driven squeeze. Funding rates have normalised, implied volatility has compressed below 50, and downside skew has moderated from deeply defensive levels to a more balanced 5 delta range. This repricing suggests that traders are no longer aggressively hedging tail risk, but neither are theyaggressivelyre-leveraging.

On-chaindatafurtherreinforcestheconstructiveundertone.Approximately18,400 BTC were withdrawn from exchanges over the past week, continuing the medium-term decline in exchange balances. Long-term holder supply has begun rising again after a multi-month distribution phase, increasing to 14.3 million BTC followingaDecembertrough.

Historically, expansions in long-term holder supply have acted as a multi-month leading indicator for price recovery, signalling that stronger hands are re-accumulatingintoweakness.

ETFflowsremaintheprimarysoftspot.Flowsbrieflyturnedpositiveaheadofthe CPIannouncement,butdidnotsustainthatshift.Institutionaldemandhasnotyet reasserted itself in size, and sustained ETF absorption will be required to decisively reclaim higher on-chain resistance levels. Structurally, Bitcoin remains confinedbetweentwomajorvaluationanchors.Overhead, theTrueMarketMean near $78,200 now acts as resistance following repeated failures to reclaim it. Below,theRealisedPricenear$55,000definesthedeepervalueboundaryofthe cycle.Untilpriceresolvesbeyondthisband,themarketislikelytooscillatewithin a broad consolidation range, with absorption at the lows and distribution near cost-basisresistance.

US macro data at the start of 2026 point to gradual stabilisation rather than renewed acceleration. The Consumer Price Index showed inflation easing to 2.4 percent year-on-year in January, down from 2.7 percent in December, with monthly prices rising 0.2 percent. The moderation was largely driven by lower energy and gasoline costs, while core inflation, which excludes food and energy, rose 0.3 percent on the month and 2.5 percent annually. However, services inflation remains firm at 3.2 percent year-on-year, and tariffs continue to place upward pressure on certain goods, suggesting underlying price pressures have notfullydissipated.

Thelabourmarketpresentsasimilarpictureofresiliencewithmoderation.January nonfarmpayrollsincreasedby130,000andtheunemploymentrateedgeddownto 4.3percent.However,annualbenchmarkrevisionsreducedpriorjobestimatesby 898,000,confirmingthat2025hiringwasweakerthanpreviouslyreported.Wage growth remains steady at 3.7 percent year-on-year, but retail sales were flat in December and the control group slipped 0.1 percent, indicating softer consumer demand.Together,thedatasupporta“slow-hire,slow-fireˮenvironment,reducing the urgency for very near-term rate cuts while keeping the Federal Reserve in a patientstance.

Alongside these macro dynamics, the Federal Reserve has shifted from shrinking its balance sheet to expanding it modestly. Funding market indicators, including the spread between the Secured Overnight Financing Rate and the Interest on Reserve Balances IORB, signalled tightening reserves, prompting renewed Treasurypurchasestostabiliseliquidity.Thisexpansionisoperationalratherthan stimulative, but expanding reserves tend to support financial conditions, cushion riskassetsandapplygradualstructuralpressureontheUSdollar.

In the crypto sector, institutional positioning remains selective. Goldman Sachs reduced its exposure to spot Bitcoin and Ether exchange-traded funds ETFs in the fourth quarter of 2025, trimming holdings by 39.4 percent and 27.2 percent respectively,amidabroadermarketpullback.However,itaddedpositionsinnewly launched XRP and Solana ETFs, suggesting continued engagement rather than exit.

Regulatory developments are also accelerating globally. Hong Kongʼs Securities and Futures Commission expanded its framework to allow licensed platforms to offer crypto perpetual contracts to professional investors and clarified rules on margin financing and market-making, while preparing to implement a stablecoin licensingregimeinMarch2026.IntheUS,twosenatorshaveurgedtheTreasury toassesswhethera$500millionUAE-linkedinvestmentinWorldLibertyFinancial warrantsanationalsecurityreviewundertheCommitteeonForeignInvestmentin the United States. The firm issues the USD1 stablecoin and is seeking a national trust bank charter, placing it at the intersection of digital assets, banking regulationandgeopoliticalscrutiny.

1.MarketSignals

● BitcoinAttemptsRecoveryAmidst FavourableMacroBackdrop

2.GeneralMacroUpdate

● USInflationCoolsinJanuarybut UnderlyingPressuresPersist

● USLabourMarketStabilisesWhile ConsumerSpendingSoftens

● StructuralLiquidityReturns: UnderstandingtheFedʼsApproachtoIts BalanceSheet

3.NewsFromtheCryptosphere

● GoldmanSachsCutsBitcoinandEther ETFExposureasMarketSoftensinQ4

● HongKongExpandsCryptoRegulatory FrameworktoBoostTradingand ProfessionalProducts

● USSenatorsSeekNationalSecurity ReviewOfUAEStakeInWorldLiberty Financial

BitcoinAttemptsRecoveryAmidst FavourableMacroBackdrop

Followingthesharpfallin BTConFebruary5th, whichsawBTCestablisha local low at USD 60,100, the asset has had a volatile week. The price reboundedapproximately20percentbeforeretracingloweragain,correcting sevenpercentfromtheweeklyopen,beforerisingoncemoreandstabilising, followingfavourableUSmacroeconomicdatareleases.

Figure1BTC/USDHourlyChart.Source:Bitfinex)

ThisisonlythesecondoccurrencesincetheweekstartingOctober20ththat price has corrected significantly (more than five percent), only to recover again,andmoveabovetheweeklyopen.Whilethisisnotasignalforsustained upside, it shows strength in the market, and could carry the price higher to significant upside targets like the True Market Mean and the Monthly Open, bothconfluentaroundthe$78,500level.Itisalsonotablethatlastweekalso recordedthefirstgreenweeklycloseafterthreesuccessiveredweeksforBTC.

The latest Consumer Price Index CPI) print indicated moderating inflationary pressures, while labour market data suggested gradual softening rather than renewedacceleration.Asaresult,market-impliedprobabilitiesshiftedtoreflecta 50 percent chance of three potential rate cuts in 2026, with the first adjustment increasingly priced for either the April or June Federal Open Market Committee FOMC) meeting. This repricing in forward policy expectations provided a constructivebackdropforriskassets.

For several months, digital asset markets had been constrained by persistent inflation concerns, restrictive central bank rhetoric and the after-effects of JanuaryandearlyFebruaryʼspronounceddrawdown.TheCPIreleasemarkedthe first substantive evidence of disinflation gaining traction, prompting a reassessment of the Federal Reserveʼs policy trajectory. Improved liquidity expectations,combinedwithstabilisingOnChainmetrics,supportedameasured recoveryacrossthecomplex.

BTCʼs rebound following the CPI print was reinforced by derivatives positioning. Funding rates normalised, implied volatility compressed and downside hedging demand moderated, suggesting a recalibration of short-term risk premia rather than an aggressive re-leveraging phase. This shift indicates that participants are positioningforreducedrealisedvolatilitywhilemaintainingdirectionalexposure.

Headline CPI rose 2.4 percent year-over-year, down from 2.9 percent in December and below consensus expectations. While still above the Federal Reserveʼs two percent target, the deceleration reinforced evidence that prior tightening is filtering through the economy and that upside inflation risk is moderating.

Bitcoinʼs implied volatility moved under 50 for the first time since the monthly open.ThismovewasbroughtaboutbythedownwardtrendclimaxingonFeb5th and BTC simultaneously holding the lows while posting an impressive recovery lastweekconfluentwithbullishnews.

3

ImpliedVolatilityCurvesAcrossAllAvailableExpiries

AllFebruaryexpiriesatthe$72,000strikearenowtradingbelow50vol.Implied volatility reflects the magnitude of price movement the market expects over a given horizon. Adjustments of this scale rarely represent transient dislocations; they typically signal a broader repricing of forward risk across the volatility surface.

Althoughimpliedvolatilityhasretracedfromrecentextremes,itremainselevated across maturities. This indicates that participants continue to price sustained uncertaintyratherthanarapidnormalisationinrealisedvolatility.

Thetermstructureremainssteep.Front-monthimpliedvolatilityiscomparatively elevated, while three- and six-month tenors are more anchored. This configurationsuggeststhateventriskisstillbeingpricedinthenearterm,albeit at lower intensity than previously observed. At the same time, aggregate positioning does not indicate that options markets are assigning high probability toanextendedbearishregime.

In this environment, professional participants may structure trades that monetise the slope of the curve, such as selling longer-dated volatility to finance shorter-dated hedges. This approach allows for positive carry generation while retainingprotectionagainstnear-termadversemoves.

Thecross-assetresponsewasalsoimmediate.USTreasuryyieldsdeclined,with the ten-year yield falling from around 4 percent to approximately 3.82 percent. The US dollar index DXY) eased to 101.5. Precious metals stabilised following Januaryʼs sharp positioning unwind, though volatility remained elevated. For digitalassets,theshiftinmacroconditionswasconstructive.

Lower real yields reduce the relative carry disadvantage of non-yielding assets such as Bitcoin, while a softer dollar supports global liquidity conditions. In parallel,theriskthatfurthertighteningwouldconstrainliquidityacrossstablecoin issuersandcryptocreditchannelsdiminishedmaterially.

BTC responded accordingly, with the broader digital asset complex benefiting fromtheimprovedmacroimpulse.

Source:TheBlock)

Aninterestingmetricconfluentwithon-chainpatternsisthe25-deltaskew,which isameasureofriskreversal,movedfromstronglynegative(put‑heavy)toamore balanced average of 5.5. This indicates that traders had shifted from buying downsideprotectiontosellingvolatilityorpositioningforfurtherupside.

Year-to-date,sell-sidepressurehaslargelybeenabsorbedwithinthesamerange that defined much of the first half of 2024, between $60,00072,000. Repeated defenceofthiszonesuggestsemergingbuyerconviction,particularlyasETFflow datareflectsdiminishingnetoutflowsrelativetoJanuaryʼsdistributionphase.

On-Chain metrics reinforce this constructive spot backdrop. Exchange balances continued their medium-term decline, with approximately 18,400 BTC withdrawn from centralised venues over the past week. Sustained net outflows of this magnitudetypicallyindicatereducedimmediatesellliquidityandapreferencefor self-custodyorlongerholdingperiods.

If absorption across the range persists, the structure could resemble prior accumulationphasesthatprecededimpulsiveexpansions.Durablerangesupport, combined with declining exchange supply, would strengthen the case for a constructivemedium-termbase.

BitcoinETFInvestingHasStalled

BTCETFshaveseennetsellingsinceOctober2025,withcumulativeflowssince launch in January 2024 peaking in late October at 62,700 BTC and sits currently at 54,311 BTC, with some sporadic inflows. This overall trend of consistent outflowsacrossallprovidersshowsdecreasingappetiteforcryptoexposurefrom theETFcohort.

AfterheavyredemptionsinlateJanuary,wherecombinedoutflowstopped$2.7 billionovertwoweeksandcontributedtothesell‑off,flowsstabilisedandturned positive before CPI week. However, last week overall, flows are still negative. A pointtobenotedisthattheBlackRockIBITfund,whichisbyfarthelargestETF issuerhasaonedaydelayinflowsreporting,sowhilewesuspectthattheyhave large inflows on Friday, evident from spot market flows, we will not receive the numbersuntillaterthisweek.

HowareLong-TermHoldersPositioned?

Long-term holder LTH) supply is finally moving higher, signalling early signs of accumulation.

Previously this metric continued to fall as both whales and long-term holderswhich are often overlapping cohorts of investors - distributed their holdings by 13.5%betweenJuly-December2025.Currentlythemetrichasmovedupwardsto 14.3millionBTC,afterbottominginmidDecember.

BitcoinMagazinePro)

Typically,LTHsupplyisaleadingmetrictoprice,asaccumulationstartsduringthe latter end of downtrends. In recent history, this metric reaching new highs has provedtobea34monthleadingindicatorinrelationtoprice.

If LTH accumulation continues to increase at the current pace, we might see a repeatofJune2023orSeptember2024-likepriceactiononceourcurrentrange resolvestowardstheupside.

From a macro range standpoint, as we have previously highlighted, BTC is increasingly confined between two major on-chain metrics at range extremes thatalsohaveotherconfluencesfromtechnicallevelssuchasthemonthlyopen asresistance.

On the upside, the True Market Mean $78.2k) has flipped into overhead resistance following repeated failures to reclaim it on both daily and weekly timeframes.Thislevelpreviouslyactedasademandanchorduringconsolidation phases, but after the breakdown, it now represents a zone where prior support maytransitionintosupply.

On the downside, the Realised Price $55k continues to define the deeper value boundary of the current cycle. Historically, this metric, which reflects the aggregate cost basis of the network, has served as the level where long-term capital meaningfully re-engages during extended corrective phases. Moves toward the Realised Price typically coincide with late-stage deleveraging, capitulationamongweakercohorts,andthegradualre-accumulationbystronger hands.

As long as price remains trapped between these two structural anchors, the marketislikelytooscillatewithinawidebutdefinablevaluationband,withupside attempts capped near cost-basis resistance and deeper downside attracting longer-horizonbuyers.

USInflationCoolsinJanuarybut UnderlyingPressuresPersist

US inflation seems to have eased at the start of the year, but the slowdown may notfullyreflectunderlyingpricepressures.Whilelowerenergyandgasolinecosts helped moderate headline figures, structural factors such as tariffs and data distortionscomplicatetheoutlookformonetarypolicy.

The Consumer Price Index CPI released last Friday, February 13, showed that inflationrose2.4percentinJanuaryfromayearearlier,downfrom2.7percentin December.Onamonthlybasis,pricesincreased0.2percent.Coreinflation,which excludesfoodandenergytoprovideaclearerviewofunderlyingtrends,rose0.3 percentinthemonthand2.5percentovertheyear.

The moderation in headline inflation was largely driven by energy prices, which fell1.5percentinJanuary,includinga3.3percentdeclineinenergycommodities anda3.2percentdropingasolineprices.Gasolinewasdownabout3percenton the month and 7.5 percent from a year ago. Used car and truck prices also declined1.8percent,contributingtosoftertransportationcosts.

However, not all categories improved. Services prices increased 0.4 percent in January and were up 3.2 percent year-on-year. Services account for roughly 64 percent of the CPI basket, meaning movements in this category carry significant weight. Food and beverages increased 0.2 percent in January and 2.8 percent fromayearearlier.Electricityandhomeheatingcostsremainedelevateddespite broaderenergyweakness.

Headline inflation remains above the Federal Reserveʼs two percent target, and we do not expect the latest CPI reading to materially accelerate rate cuts, given continued solid economic growth and a stabilising labour market reduces the urgencytoeasemonetarypolicy.

Tariffs also continue to influence price dynamics. Import duties imposed by the TrumpadministrationhaveraisedtheeffectiveUStariffratetoanestimated16.9 percent, the highest since 1932, according to the Yale University Budget Lab. Tariffsactastaxesonimportedgoods,andbusinessesoftenpasssomeofthese costsontoconsumers.Immigrationpolicyhasalsocontributedtohigherservice costsbylimitinglaboursupplyincertainsectors.

There is also an important methodological caveat. During the government shutdownfrom1Octoberto12November2025,federalstatisticianswereunable to collect full pricing data. In several categories, the BLS assumed no price changesoccurredduringthatperiod.Thisstatisticaldistortionmayoverstatethe apparentimprovementinpricestability.

Januaryʼs inflation report offers cautious optimism but not a decisive turning point.Lowerfuelandused-vehiclepriceseasedheadlineinflationpressures,yet service costs and tariff-sensitive goods continue to rise. For policymakers, the data supports taking a patient stance towards easing monetary policy. For households,thepathbacktosustainedpricestabilityremainsgradualratherthan immediate.

USLabourMarketStabilisesWhile ConsumerSpendingSoftens

TheUSlabourmarkethasshownsignsofstabilisationatthestartof2026,evenas pastjobfigureswererevisedsharplylower.Atthesametime,consumerspending hasslowed,suggestingthateconomicgrowthisbecominglessreliantonhiring andmoredependentonproductivityandfiscalflows.

Figure10UnemploymentRate,NonfarmPayrollEmployment Source:BureauofLaborStatistics)

In its January Employment Situation Report, the Bureau of Labor Statistics BLS reported that nonfarm payrolls increased by 130,000 in January, while the unemployment rate declined to 4.3 percent. However, the BLS also issued its annual benchmark revision, reducing previously reported job totals between April 2024 and March 2025 by 898,000 on a seasonally adjusted basis. A benchmark revisionisaroutineupdatethatalignssurvey-basedestimateswithmorecomplete administrative records. This adjustment provides a clearer picture of underlying labourconditions.

After accounting for these revisions, hiring appears to have stabilised in recent months. Job creation averaged 15,000 per month over the prior year, reflecting a low-growth environment rather than contraction. Over the past three months, hiring has been moderately improving, supported by earlier rate cuts. Policymakers often view monthly job growth in the range of zero to 50,000 as consistentwithastablelabourmarket,givenslowerpopulationgrowthandtighter immigrationpolicies.

Sector data however showed divergence. Health care and social assistance led gains,addingacombined124,000positionsinJanuary.Constructionemployment roseby33,000,partlylinkedtoinvestmentinartificialintelligencedatacentres.In contrast, federal government employment declined by 34,000, while financial activities shed 22,000 positions. Manufacturing posted a small monthly gain but remainsbelowprior-yearlevelsfollowingtrade-relateduncertainty.

Wage growth remained firm. Average hourly earnings increased 0.4 percent in January and 3.7 percent on an annual basis. Higher wages, alongside a 528,000 rise in household employment, contributed to a modest increase in labour force participation.

Figure11CMEFedWatchTool-MeetingProbabilities

Importantly, the data does not suggest recessionary conditions. Instead, they point to a “slow-hire, slow-fireˮ environment, meaning businesses are cautious about expanding payrolls but are not engaging in widespread layoffs. The CME FedWatchToolindicatesthatinvestorsexpecttheFedtomaintaincurrentpolicyin thenearterm,withsomeprobabilityofarateadjustmentmid-year.Investorssee 50percentprobabilityofthreeratecutsthisyearandthathasreflectedinprices driftinghigherasfurtherdiscussedintheMarketSignalssection.

While employment shows resilience, consumer demand has weakened. The Commerce Department reported that headline retail sales were unchanged in December, below expectations for a 0.4 percent increase. The control group, which feeds directly into gross domestic product GDP) calculations, declined by 0.1percent.

Retail sales volatility reflects shifting spending patterns. Tariffs and a temporary government shutdown disrupted consumption in late 2025, leading to earlier purchases in the summer and softer activity toward year-end. Consumer confidence has also been affected by slower job growth and ongoing affordability pressures. While tax refunds worth approximately $100 billion are expectedtosupportdemandinthecomingmonths,thetiminganddistributionof that impact remain uncertain. Some households may also prioritise debt repaymentorsavingsratherthanimmediateconsumption.

Takentogether,thedatasuggestsadivergencebetweenGDPandemployment. GDPmeasurestotalproductionintheeconomy,includinginvestmentandoutput, but it does not always reflect household financial conditions. Hiring has slowed due to demographic changes, tighter immigration rules, productivity improvements and the end of pandemic-era labour hoarding. As artificial intelligence investment accelerates, production may continue to expand without aproportionalincreaseinpayrolls.

For monetary policymakers, this environment presents a nuanced challenge. Employment is stable enough to avoid immediate rate cuts, yet the softness in consumerspendingwarrantsvigilance.TheJanuarydatareinforcesabasecase for gradual stabilisation rather than renewed acceleration, an outcome that supports a patient policy stance as structural economic changes continue to unfold.

StructuralLiquidityReturns: Understandingthe

FedʼsApproach toItsBalanceSheet

Figure13FederalReserveTotalAssetsSource:FredCharts)

The Federal Reserve has moved from reducing its balance sheet to expanding it again. This shift is not an emergency response, but an operational adjustment designedtomaintainstabilityinafinancialsystemthatis largeand complex.

Figure14.SecuredOvernightFinancingRate,SOFR,MinustheInterest RateonReserveBalances,IORBSource:Macromicro)

Inrecentmonths,fundingmarketsindicatedthatbankingsystemreserveswere becoming tight. When reserves fall too low, short-term borrowing costs can drift above the Fedʼs target range. As shown in Figure 14 above, the spread betweenSecuredOvernightFinancingRateSOFR)andtheInterestonReserve Balances IORB) moved persistently into positive territory, signalling that secured overnight funding was trading above the rate the Fed pays on reserves. This shift typically indicates that liquidity buffers are thinning and reservesarebecominglessabundant.Topreventfurtherpressure,theFederal ReserveresumedregularpurchasesofUSTreasurysecurities.Theobjectiveis simple: ensure that banks hold enough reserves to settle payments smoothly andtokeepshort-terminterestratesanchored.

Atitscore,thisexpansionisamaintenancefunction.Astheeconomygrows,as governmentdebtincreasesandasbankdepositsexpand, thepoolofreserves must also grow. Without that adjustment, the system periodically runs into friction.

The mechanics are straightforward. The Fed credits banks with newly created reserves and, in exchange, purchases Treasury securities. The Fedʼs balance sheet expands on both sides: its assets increase through additional Treasury securities, and its liabilities increase through higher reserve balances. For banks, reserves are highly liquid. A larger reserve base gives them greater flexibilitytomanagelendingandfundingwithoutstrain.

This differs from traditional quantitative easing. In earlier cycles, the Fed purchased long-term bonds with the explicit aim of stimulating economic activityaftercuttingpolicyratestonearzero.Thecurrentapproachfocuseson preservingorderlymarketfunctioningratherthanaggressivelypushinggrowth higher.Yetinbothcases,theresultisanincreaseinbaseliquidity.

Even gradual balance sheet growth influences asset behaviour. When liquidity is expanding rather than contracting, financial conditions tend to remain accommodative. Stable funding markets reduce the risk of abrupt credit tightening, which helps sustain valuations in equities and other risk-sensitive assets. While this does not eliminate volatility, it lowers the probability of systemicstressevents.

WhatDoesThisMeanforFinancialAssets?

Figure15USDollarIndexSource:

TradingView)

A steadily expanding balance sheet can also modestly weigh on the US dollar over time. When the supply of base money increases persistently, particularly alongside large fiscal deficits, the currency faces structural pressure. The US Dollar Index has already shown softer dynamics, declining roughly 11 percent over 2025 and continuing to weaken into early 2026, trading around 96.9 as of mid-February2026afterhittingmulti-yearlowsnear95.5.Thisisnotnecessarily immediate or dramatic, but over longer periods, higher liquidity often correspondswithsoftercurrencydynamics.

Bitcoin and hard assets such as gold typically respond to these liquidity conditionsincycles.Wheninvestorsanticipateexpandingreservesandongoing fiscaldeficits,capitaloftenrotatestowardscarceassets.However,becausethis is not an aggressive stimulus phase, the moves tend to unfold in waves rather than in a single surge. Liquidity builds gradually, positioning increases, correctionsoccur,andthebroadertrendresumes.

Importantly,thisenvironmentdoesnotresembleaconventionaltighteningcycle. In past tightening phases, the Fed reduced its balance sheet, drained reserves and allowed financial conditions to tighten meaningfully. Today, although policy rates remain positive, the balance sheet is no longer shrinking. Instead, it is growing in line with the scale of the financial system. That distinction changes themarketbackdrop.

Thebroaderimplicationisthatbalancesheetexpansionhasbecomeembedded inthestructureofthemoderneconomy.AsnominalGDP,depositsandTreasury issuance continue to rise, reserve growth must follow to prevent repeated liquiditystrains.Thecurrenttrajectorydoesnotrepresentanextraordinarysurge inmoneycreationrelativetothesizeofthesystem.Itrepresentscontinuity.

For investors, the message is nuanced. Liquidity is not contracting. Risk assets therefore retain an underlying cushion. The dollar may face gradual headwinds. Scarceassetscanbenefitduringphaseswhenliquidityexpectationsstrengthen. The regime is neither a crisis stimulus nor a strict restraint; it is structural maintenanceinahighlyindebtedworld.

GoldmanSachsCutsBitcoinand EtherETFExposureasMarket SoftensinQ4

Goldman Sachs reduced its exposure to spot Bitcoin and Ether exchange-traded fundsETFsinthefourthquarterof2025,accordingtoitslatestfilingwiththeUS SecuritiesandExchangeCommissionSEC.Theadjustmentcameduringaperiod ofbroadweaknessacrossthedigitalassetmarket.

InitsForm13FsubmittedtotheSEC,theinvestmentbankreportedthat,asof31 December, 2025, it held approximately 21.2 million shares across multiple spot Bitcoin ETFs, valued at $1.06 billion. This represented a 39.4 percent decline in sharecountcomparedwiththethirdquarter.

The firm also scaled back its exposure to spot Ether ETFs. Holdings stood at around 40.7 million shares at year-end, with a market value of roughly $1 billion. Thatmarkeda27.2percentreductionfromthepreviousquarter.

While trimming its Bitcoin and Ether positions, Goldman Sachs initiated new allocations to recently launched spot XRP and Solana ETFs. By the end of December, 2025, the bank reported holdings worth $152.2 million in spot XRP ETFsand$108.9millioninspotSolanaETFs.

Theportfoliochangesoccurredagainstthebackdropofadecliningcryptomarket inthefinalquarteroftheyear.Bitcoinfellfromapproximately$114,000attheend ofSeptembertoabout$87,000byyear-end.Etheralsoweakenedoverthesame period,decliningfrom$4,140to$2,970.

Therebalancingsuggeststhatinstitutionalexposureremainsactivebutselective. Ratherthanwithdrawingfromtheassetclassentirely,GoldmanSachsappearsto have reduced risk in larger positions while diversifying into newly approved products.

HongKongExpandsCrypto RegulatoryFrameworktoBoost TradingandProfessionalProducts

Hong Kongʼs financial regulator, the Securities and Futures Commission SFC, has unveiled a set of expanded rules aimed at deepening the cityʼs regulated digital asset market and enhancing liquidity, particularly for professional investors, according to a press release issued last Wednesday, February 11. Underthenewhigh‑levelframework,licensedvirtualassettradingplatformswill bepermittedtooffercryptoperpetualcontracts,atypeofderivativethatallows traderstospeculateonpricemovementswithoutexpirationdates,exclusivelyto professionalclients.Theseplatformsmustalsoadoptstringentrisk‑management measures, including leverage limits, margin requirements, and robust internal controls to protect market integrity and manage volatility risks. Separately, the SFC issued guidance allowing licensed intermediaries to provide margin financing for crypto asset trading using a broader range of collateral, explicitly includingbitcoinandether,providedappropriatesuitabilityassessmentsandrisk controlsareinplace.

Intandemwithderivativesandmargindevelopment,theSFCclarifiedconditions formarket‑makingactivitiesbyaffiliatedentitiesonlicensedplatforms,aimingto improve liquidity while managing conflicts of interest through enhanced governance, surveillance, and disclosure obligations. The broader regulatory approach is part of Hong Kongʼs ongoing strategy to cultivate a deeper, more efficient and transparent virtual asset market, focusing on price discovery and investor confidence rather than unchecked expansion. SFC officials at the Consensus Hong Kong conference stressed that the city is prioritizing market quality,emphasisingrobustinfrastructure,controlledaccesstoadvancedtrading products, and responsible innovation to differentiate its regulatory model from otherglobalhubs.

These changes occur amid a broader regulatory evolution in Hong Kong, which includes stablecoin licensing, expected to begin in March 2026, under a new framework, and prior efforts to license crypto exchanges, dealers, and custodians.Thestablecoinregime,backedbylegislationthattookeffectin2025, is designed to bring fiat‑referenced digital currencies within a regulated perimeter with clear reserve and compliance standards. These regulatory developments signal Hong Kongʼs ambition to position itself as a leading, regulated digital finance hub in Asia, balancing innovation with investor protection and financial stability even as neighbouring jurisdictions, such as mainlandChina,maintainstrictercryptoprohibitions.

USSenatorsSeekNationalSecurity ReviewOfUAEStakeInWorld LibertyFinancial

Two US senators: Elizabeth Warren and Andy Kim, have urged the Treasury Secretary Scott Bessent, to determine whether a $500 million investment by a UAE-linked entity into World Liberty Financial should face national security scrutiny.Therequestcentresonwhetherthetransactionwarrantsreviewbythe CommitteeonForeignInvestmentintheUnitedStatesCFIUS,theTreasury-led bodythatassessesforeigninvestmentsforsecurityrisks.

CFIUS examines transactions that could provide foreign actors with access to sensitive technology, infrastructure, or large volumes of personal data. Lawmakers argue that World Liberty Financial, which collects customer information and operatesinthedigitalassetsector, mayfallwithinthatscope.

The reported 49 percent stake was acquired by G42, a technology firm backed bySheikhTahnoonbinZayedAlNahyan,theUAEʼsnationalsecurityadviser.The investment was made shortly before President Donald Trumpʼs inauguration in January 2025. Public reporting indicates that part of the upfront payment was directedtoentitieslinkedtotheTrumpfamilyandtoaffiliatesofSteveWitkoff,a co-founderofWorldLiberty.PresidentTrumphasdeniedknowledgeofthedeal.

Concerns also stem from prior scrutiny of G42ʼs historical ties to Chinese technology firms. Although G42 has stated it divested from Chinese holdings in early 2024, lawmakers argue that any foreign government-linked stake in a US financialtechnologyfirmmeritsreview.

World Liberty Financial issues the USD1 stablecoin, which has grown to more than $5 billion in circulation since March 2025, and is seeking a national trust bankcharterfromtheOfficeoftheComptrolleroftheCurrency. Duringapress conference on February 3, President Donald Trump denied knowledge of the $500millioninvestment.

The Treasury Department has not confirmed whether a CFIUS review is under way. The case highlights increasing scrutiny of foreign state-linked capital enteringstrategicareasofdigitalfinance.