Four Central Banks, Four Different Paths
What happened last week in crypto and macro
The Signal
Four central banks, four different outcomes:
The Federal Reservecut 25 basis points to 3.50-3.75% on December 10, but the tone was hawkish. The updated dot plot projects just two cuts in 2026, down from four. Chair Powell signaled a pause to assess conditions.
The ECBheld at 2.00% on December 18, with President Lagarde effectively declaring the easing cycle complete.
The Bank of Englandcut to 3.75% on December 19 in a hawkish 6-3 vote, with three members preferring to hold despite contracting GDP.
And the Bank of Japanraised rates to 0.75%, the highest since 1995, yet the yen paradoxically weakened as Governor Ueda declined to provide forward guidance.
The takeaway: overseas, major central banks have completed or paused their easing cycles. The era of synchronized cutting is over.
Last week delivered a rare convergence of major central bank decisions, shutdown-distorted US economic data, and a record options expiration. Bitcoin, caught in thin year-end liquidity and overleveraged positioning, saw repeated $3,000-4,000 swings that liquidated traders in both directions.
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The Data Picture: Soft Inflation, Softening Labor Market
The 43-day government shutdown created unprecedented data problems. October employment data is permanently lost. November releases relied on truncated collection periods.
November CPI, released December 18, came in soft: 2.7% headline, below the 3.1% consensus. Markets initially rallied. But the data contained an unusual anomaly: "rent of primary residence" registered 0.00% month-over-month, likely a collection artifact rather than a real signal. Economists flagged that the true inflation picture is probably somewhat higher than reported.
November unemploymenthit 4.6%, a four-year high. Payrolls rose just 64,000 after falling 105,000 in October.
Here's the tension: the Fed has shifted its focus from inflation (which appears contained) to the labor market (which is softening). This week's data reinforces the case for continued rate cuts. But the surprisingly low inflation print carries a darker interpretation. When consumers pull back spending sharply, it can signal recession fears, not just disinflation. People feeling poorer and worried about job security spend less. That shows up as lower inflation, but it's not the good kind.
The Fed is watching the labor market closely. If unemployment continues rising, the cutting cycle resumes regardless of what the distorted CPI figures suggest.
Equities: Record Expiration, Muted Reaction
Friday's triple-witching was the largest on record, with over $7 trillion in option and future notional value expiring. Despite concerns about gamma-driven volatility, markets handled the event smoothly.
The S&P 500 finished the week up 0.9%, recovering from Thursday's post-Fed selloff. Treasury yields drifted higher despite soft CPI, with the 10-year around 4.52%. The dollar held near 108, its highest since November 2022.
Bitcoin: Thin Liquidity Meets Leverage
Bitcoin's week was defined by violence in both directions. Prices swung from above $100,000 to below $93,000 and back, with $3,000-4,000 moves occurring in a matter of hours.
The story is straightforward: thin year-end liquidity amplifies every move. Add a data-heavy week with multiple macro catalysts (Fed, BoJ, CPI, jobs), and you get constant repricing. Layer in the substantial leverage still in the system, and liquidation cascades turn modest moves into violent ones. Longs get stopped out on the way down, shorts get squeezed on the way up. The broader crypto market followed Bitcoin through these gyrations, with altcoins suffering even steeper percentage swings.
This is the mechanical reality of crypto markets during holiday weeks: fewer participants, wider spreads, and algorithmic liquidation engines that don't take time off.
ETF Flows: Institutions Are HODLing
This week's ETF flows were as volatile as the underlying asset. Multiple days saw $500 million+ in either direction as Bitcoin whipsawed.
But zoom out and the picture is striking. As Bloomberg's Eric Balchunas noted, BlackRock's IBIT ranks sixth on the 2025 ETF flow leaderboard with roughly $37 billion in net inflows, despite Bitcoin posting negative returns year-to-date. IBIT attracted more capital than the SPDR Gold Trust (GLD) even though gold was up over 25% on the year. Balchunas called it a "HODL clinic" from long-term investors. The message: institutions aren't trading the volatility. They're accumulating through it.
Looking Ahead
The final trading week of 2025 will be shaped by holiday-thinned liquidity. PCE inflation on Friday, December 27 is the main macro release. Markets will parse it for the same shutdown distortions that affected CPI.
The bigger question for 2026: with central banks largely done easing and the labor market softening, can risk assets find support? The leverage flush suggests crypto is resetting expectations. Whether that creates opportunity or marks the start of prolonged consolidation depends on whether the macro picture stabilizes.
Tidbits
JPMorgan launches tokenized money market fund. On December 15, J.P. Morgan Asset Management launched MONY on Ethereum, becoming the largest GSIB to deploy a tokenized fund on a public blockchain. The fund offers subscription/redemption via USDC with a $1 million minimum.
Nasdaq files for near-24/7 trading. Nasdaq submitted an SEC application on December 15 to extend equity trading to 23 hours per day, explicitly citing competition from crypto's round-the-clock markets. Target launch is Q3 2026.
Visa launches USDC settlement in the US. On December 16, Visa announced American issuers can now settle VisaNet obligations in USDC on Solana. The company reports a $3.5 billion annualized run rate in stablecoin settlement volume.
Crypto legislation confirmed for January. White House crypto czar David Sacks announced on December 18 that the CLARITY Act markup is confirmed for January 2026, moving landmark market structure legislation closer to passage.
MoMA acquires NFTs. The museum acquired eight CryptoPunks, preserving them as foundational digital art in its permanent collection. CryptoPunks maintained strong market activity, with high-value sales and continued interest from collectors globally.
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