Weekly Update: 5th of February

Hodl Team
5 February 2025
Welcome to our weekly update, where we provide insights into the latest developments in the digital assets market.

What happened between the 29th of January and the 5th of February?

  • Trump’s tariffs on Canada, Mexico, and China wreak havoc across financial markets, causing the wider digital assets market to fall by approximately 15%, wiping $760 billion in three days. Read more
  • The digital assets ETF race heats up as various US investment firms file for various altcoin ETFs such as Doge, Polkadot, and XRP. Read more
  • In accordance with the latest European Union MiCAR regulation, various exchanges are obtaining their licenses while others have started delisting Tether’s stablecoin USDT. Read more
  • US “crypto czar” David Sacks and Republican lawmakers vow regulatory clarity as they aim to pass two major digital assets bills to aid the industry. Read more

Donald Trump dumps the market

On February 1st, Donald Trump followed through on his campaign promises by imposing a wave of import tariffs on key U.S. trading partners. Canada and Mexico faced tariffs of 25%, while emerging rival China was hit with a 10% tariff. This unexpectedly aggressive move sent shockwaves through financial markets, with digital assets—trading continuously over the weekend—bearing the initial impact. In less than three days, the cryptocurrency market shed over $760 billion in market capitalization, with more than $2 billion in positions liquidated. This marks the largest liquidation event to date, surpassing even the collapses of FTX and Luna. Traditional financial markets also reacted negatively, with major indices like the S&P 500 and Nasdaq 100 declining by over 1%. However, as reports emerged that the tariff implementation would be delayed, most markets rebounded from their initial losses.

Investment firms seek altcoin ETFs

In January, U.S. investment firm Bitwise made an unexpected move by filing for a Dogecoin ETF. This follows similar filings from investment managers Rex Shares and Osprey Funds, which have sought approval for various crypto ETFs, including Dogecoin. The race for altcoin ETFs appears to be accelerating. Over the past week, 21Shares submitted an application for a Polkadot ETF, while Grayscale filed to convert its Ripple Trust into a spot ETF. With the departure of Gary Gensler and growing optimism that the Securities and Exchange Commission (SEC) will adopt a more favorable stance toward digital assets, the agency has been inundated with new filings. Many market participants are hopeful that multiple altcoin ETFs could launch this year.

The effects of MiCAR are being seen

Since December 30, 2024, the European Union's Markets in Crypto-Assets Regulation (MiCAR) has been in effect, and its impact is gradually unfolding across Europe. Notably, Bitpanda became one of the first major exchanges to obtain a MiCAR license, while Germany's first license was awarded to Boerse Stuttgart Digital, an institutional digital asset custodian. However, major players such as Coinbase, Binance, and Kraken are still in the process of securing their licenses.

A key component of MiCAR is the increased regulatory oversight of stablecoins. While some, like Circle’s USDC, have secured approval or are cooperating with regulators, Tether’s USDT—the world’s largest stablecoin with a $140 billion market capitalization—has instead criticized the regulation. In response to MiCAR, exchanges such as Kraken and Crypto.com have announced plans to delist USDT from their European platforms, with more likely to follow.

Regulatory clarity is on its way

On February 5th, newly appointed crypto czar David Sacks, alongside Republican lawmakers, held a press conference on digital assets and the U.S.’s role as a global leader in the sector. During the event, officials announced the formation of a working group comprising lawmakers from both the House and Senate. This group will be responsible for drafting two key digital asset bills—one focused on regulating stablecoin issuance and the other on broader digital asset regulations.

While many market participants found the conference underwhelming due to the lack of discussion on Bitcoin or altcoins, the emphasis on regulatory frameworks marks a significant step forward. Clearer guidelines could pave the way for greater institutional adoption and long-term market stability.

In other digital assets news

  • Tether’s stablecoin USDT will be integrated with Bitcoin’s layer 2 network Bitcoin lightning, further increasing its exposure in the digital assets market.
  • Global Bitcoin ETFs shortly surpass $125 billion in assets under management (AUM), while BlackRock leads the pack with $60 billion in AUM.

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