Bitcoin and Stablecoin During the Transition of Inflation Types: Market Update

Cryptocurrency markets are gaining attention as traders look intelligently at the type of inflation that could impact their Bitcoin trading strategies. Despite the challenges brought by the new regulatory landscape, the crypto community remains optimistic about upcoming opportunities, especially if professional inflation data shows a decline.

Stablecoin Rewards Rejected: The New Regulatory Landscape

U.S. credit unions are joining banks in rejecting reward payments for holding stablecoins. This is a significant change stemming from a proposed bill—the Digital Asset Market Clarity Act—that aims to categorize digital assets into three main groups: digital commodities like Bitcoin and ether overseen by the CFTC, investment contract assets regulated by the SEC, and authorized stablecoins for payments.

The latest Senate draft clearly prohibits digital asset service providers from paying “any form of interest or yield” solely for holding payment stablecoins. While this may seem negative for those expecting passive income from their holdings, industry experts see it as a bullish signal for the broader market. The probability of this law passing within the year is now estimated at 80% according to market predictions.

Inflation Type and Bitcoin Trading: How Consumer Price Trends Affect the Market

A key element this week is the release of the consumer price index (CPI) for December. Traders hope that the headline inflation rate will fall to 2.6% year-over-year from 2.7% in November, which could significantly alter the Fed’s policy outlook. A lower inflation rate could open the door for future rate cuts, a scenario traditionally bullish for Bitcoin and other risk assets.

Currently, the latest data shows BTC rising to $78,900 (down 6.13% in the past 24 hours from a higher level), while Ethereum is at $2,450 (down 9.31%). These two major assets have become proxies for market sentiment regarding inflation and Federal Reserve actions. If December CPI data shows weakening prices, we may see renewed momentum across the crypto ecosystem.

However, caution is warranted in a bearish scenario. If actual inflation turns out higher than expected, confidence in rate cut prospects will diminish. This could strengthen the US dollar and undermine risk sentiment across markets. JPMorgan has stated they no longer expect a rate cut until 2026, instead considering the possibility of rising borrowing costs next year.

Market Sentiment: Momentum and Hope for Regulatory Clarity

The top 10 tokens by market cap— including Bitcoin, Ethereum, XRP, and Solana—are trading 1-2% higher over the past 24 hours. More notably, the broader market shows altcoins like XMR, IP, and MYX gaining over 15%, indicating a revival of appetite for risk assets.

The CoinDesk 80 Index has increased by 3%, reflecting broader improvements in market sentiment. Still, traders remain cautious, waiting for inflation data before making more aggressive bets.

Bitwise Chief Investment Officer Matthew Hougan offered insightful commentary: “The CLARITY Act is the Punxsutawney Phil of this crypto winter. If it lingers but fails in Congress, winter may continue. But if it passes and is signed into law, we’re heading toward new all-time highs.” His analysis echoes industry sentiment—regulatory clarity isn’t just about compliance; it’s about unlocking institutional capital that has long been waiting on the sidelines.

SOL vs ETH: Technical Breakout Signal

The Solana-to-Ethereum (SOL/ETH) ratio broke out above a downtrend line that persisted over the past four months due to the bear market that started in September. The ratio also crossed above its 50-day simple moving average, a clear technical momentum signal.

This dual bullish breakout suggests Solana may begin to outperform Ethereum in the intermediate term. For traders, this involves betting on a broader market rotation narrative—where smaller market cap assets gain traction as risk sentiment improves.

Technology Upgrades and Ecosystem Updates

The industry is focusing on several technical upgrades this week. Hedera is moving toward v0.68 mainnet upgrade scheduled for January 13, while BNB Smart Chain is activating the Fermi hard fork, reducing block times from 750 milliseconds to 450 milliseconds.

These technical improvements are part of a larger modernization of blockchain infrastructure. As crypto ecosystems evolve, inflation type in traditional finance has become a more critical consideration. Faster transaction times and improved network efficiency contribute to more sustainable long-term growth prospects.

ETF Flows and Institutional Interest

The spot Bitcoin ETF received daily net inflows of $116.7 million, with total net inflows reaching $56.5 billion. The total Bitcoin held by ETFs has now reached 1.29 million BTC, demonstrating ongoing institutional adoption.

For Ethereum, the spot ETH ETF saw more modest daily net inflows of $5.1 million, with total net inflows of $12.46 billion and 6.08 million ETH under management.

This detail reflects institutional preference for Bitcoin, which continues to be seen as the dominant store-of-value asset. However, increasing ETH inflows also indicate growing confidence in the Ethereum ecosystem, especially as decentralized finance applications expand.

What’s Next

Next week will be critical for crypto traders. The release of inflation data could be a market-moving event. If prices are lower than expected, we could see significant gains in Bitcoin and risk assets. If higher, a correction is possible as markets reprice Fed expectations.

On the regulatory front, ongoing developments of the CLARITY Act remain a key narrative. The transition from regulatory uncertainty to clarity could open a new chapter for the industry—and this is the kind of change that could trigger a massive bull run if it is enacted into law.

For traders and investors, the combination of regulatory momentum and technical strength creates a compelling setup for larger moves in the coming months.