12.8 AI Daily: Cryptocurrency Market Volatility, Regulatory Environment Tightening

I. Top Headlines

1. Fed Chair Powell Issues Hawkish Signal, Bitcoin Plunges in Response

Fed Chair Jerome Powell stated in a recent speech that to control inflation, the Fed may need to raise interest rates to levels higher than previously anticipated. This hawkish comment triggered intense market volatility, causing Bitcoin and other risk assets to plummet.

That day, Bitcoin dropped more than 5%, falling below the $90,000 mark. Analysts pointed out that Powell’s remarks have raised market expectations of further Fed rate hikes, which will put additional pressure on risk assets. Meanwhile, the US Dollar Index rose, further suppressing the performance of Bitcoin and other cryptocurrencies.

Industry insiders believe Powell’s hawkish remarks reflect the Fed’s determination to curb inflation, which could mean a longer cycle of tight policy. In this context, Bitcoin and other risk assets may face greater downside pressure. However, some analysts still believe that as a new asset class, Bitcoin’s long-term outlook remains promising.

2. Japan Plans 20% Flat Tax Rate on Cryptocurrency Trading

The Japanese government is working to revise its tax policy on cryptocurrency trading, planning to impose a unified 20% income tax rate on all crypto transactions, regardless of the transaction amount, granting the same treatment as stocks, investment trusts, and other financial products.

This move aims to reduce the tax burden on investors and stimulate the domestic cryptocurrency trading market. Currently, Japan uses a comprehensive taxation method for crypto gains, combining them with salary and other income and applying a progressive tax rate that can reach up to 55%.

Analysts believe this adjustment will be a substantial benefit for Japanese crypto investors. A reasonable tax rate will help attract more capital into the crypto market and promote industry development. It also reflects Japan’s ongoing efforts to improve crypto regulation.

However, some believe a 20% flat rate is still higher than in some other countries or regions. How to strike a balance between industry development and regulatory oversight remains a challenge for the Japanese government.

3. Hong Kong SFC Approves First Chainlink ETF with Staking Functionality

The Hong Kong Securities and Futures Commission approved Grayscale’s launch of the first spot Chainlink ETF with staking capabilities, (GLNK), to be listed on the New York Stock Exchange. This is the world’s first Chainlink ETF product to receive regulatory approval.

The launch of GLNK will provide investors with a new investment channel and further promote the development of the Chainlink ecosystem. Unlike traditional ETFs, GLNK allows investors to earn additional returns through staking their ETF shares, increasing the product’s yield.

Analysts believe the launch of GLNK marks a growing regulatory acceptance of crypto-related financial products. This not only fosters integration between crypto and traditional finance, but also provides investors with more diversified investment options.

However, some have raised concerns about the risks of GLNK. Due to the staking mechanism, investors may face increased risks. It is important for investors to fully understand the product’s operation and potential risks.

4. Crypto Exchange get Launches Double Lottery Event to Win USDT and More

To thank its users, crypto exchange get is launching a double lottery event for new users. During the promotion, users who complete designated KYC and contract trading volume tasks can earn scratch card and mystery box reward opportunities.

The scratch card pool includes 5-100 USDT airdrops and limited-edition merchandise, while the mystery box pool offers up to 888 USDT in cash prizes, JD.com e-gift cards, Dyson hair dryers, gold bar necklaces, and other physical prizes. Each additional lottery attempt increases the chances of winning, with a 100% win rate.

A get representative stated that this event aims to give back to users and is also an attempt to further expand the exchange’s user base. Reward-based events not only boost user activity but also help increase the exchange’s brand awareness.

Industry insiders note that in the highly competitive crypto market, exchanges commonly use marketing campaigns to attract users. For users, these events are also an opportunity to win some benefits.

5. North Korean Hacker Group Lazarus Launches Aggressive Crypto Phishing Attacks

According to a report from South Korean cybersecurity firm AhnLab, North Korean hacker group Lazarus was the most frequently named group in the past twelve months, mainly using targeted “spear phishing” attacks, often disguised as lecture invitations, interview requests, and other emails to trick targets into opening them.

The report states that Lazarus is believed to be the main suspect in several major attacks, including the By hack on February 21 this year and the recent $30 million exploit on the Korean exchange Up.

Analysts point out that Lazarus has strong financial and technical capabilities, and increasingly sophisticated attack methods, posing significant security risks to crypto users. Users need to remain vigilant, handle unknown email links cautiously, and strengthen account and fund security measures.

Meanwhile, relevant regulatory and law enforcement agencies should intensify their crackdown to cut off the hackers’ funding sources and curb their illegal activities. Only through joint efforts can a safer environment for crypto users be established.

II. Industry News

1. Bitcoin Faces Short-term Pressure, Drops Over 5% Intraday

On December 1, Bitcoin prices suffered a sharp decline, with intraday losses exceeding 5% and briefly falling below the $88,000 level. Analysts attribute this drop mainly to hawkish comments from Bank of Japan Governor Kazuo Ueda. Ueda said that if economic activity and price forecasts are realized, the BOJ will continue to raise policy rates in line with economic and price improvements. This triggered market expectations for a Japanese rate hike, pushing the 2-year government bond yield to 1%, with a 76% probability of a rate hike on December 19.

Investors are worried that tightening global liquidity will further suppress the performance of risk assets, leading to sell-offs in Bitcoin and other cryptocurrencies. Meanwhile, China’s PMI showed non-manufacturing activity contracting for the first time in nearly three years, raising concerns about regional growth and further increasing market risk aversion.

Analysts say Bitcoin is under clear short-term pressure, with key support near $87,000. If it fails to hold this level, Bitcoin could fall further to $85,000 or lower. However, in the long run, Bitcoin is expected to regain momentum supported by continued institutional capital inflows.

2. Ethereum Faces Sell-off, On-chain Activity May Be Key

Ethereum prices also saw a significant drop on December 1, with intraday losses exceeding 6% and briefly falling below the $2,900 level. Like Bitcoin, Ethereum’s decline was affected by hawkish BOJ comments and weak Chinese economic data.

However, analysts note that Ethereum’s drop was relatively larger, mainly due to a decline in on-chain activity. Data shows a recent decrease in the number of active addresses and transaction volume on the Ethereum network, reflecting reduced network usage. This could affect investor confidence in Ethereum’s long-term prospects.

On the other hand, DeFi, NFT, and other application areas in the Ethereum ecosystem remain active, providing some price support. Analysts believe that if Ethereum’s on-chain activity picks up again, its price could rebound. In the short term, however, Ethereum may seek support near $2,800.

3. Altcoin Performance Diverges, Investor Caution Rises

On December 1, altcoins showed clear divergence. Some popular altcoins like Dogecoin and Shiba Inu experienced significant declines of over 7%. Meanwhile, other altcoins bucked the trend, with MemeCore and SoSoValue rising about 7% and 8%, respectively.

Analysts say this divergence reflects changing investor sentiment. Amid broader crypto market pressure, investors are becoming more cautious about high-risk assets, selling off some popular altcoins. At the same time, some investors are turning to relatively undervalued altcoins.

Overall, as high-risk assets, altcoins are subject to more volatile price swings. In the current market environment, investors should remain highly cautious with altcoin investments and manage risk exposure. Close attention to market sentiment changes is also essential to seize potential investment opportunities.

III. Project News

1. Telegram Founder Launches Decentralized AI Compute Network Cocoon

Telegram founder Pavel Durov announced the launch of Cocoon, a decentralized AI compute network based on the TON blockchain. The network aims to address the high costs and privacy issues posed by traditional AI compute providers like Amazon and Microsoft.

Cocoon allows users to securely access GPU resources via the TON network for confidential AI computation. GPU providers can earn TON token rewards through the network. Durov said Cocoon will expand GPU supply and attract more developer demand in the coming weeks.

This project could promote the decentralization of AI compute, offering users more economical and privacy-friendly AI services. Industry insiders believe Cocoon may become an important part of the TON ecosystem, bringing new use cases to TON. The network will also democratize AI computing power, providing resources to more individuals and small businesses.

2. Sui Ecosystem Project Count Surges, Move Language Attracts Developers

Move language ecosystems Sui, Aptos, and Movement have recently seen rapid development, attracting significant developer attention. Sui already boasts several star projects like Cetus, though tradable assets remain limited.

At the KBW conference in Korea, Sui had the largest gaming booth and launched new products like SuiPlay. While Aptos and Movement are newer, they also have the potential to incubate more quality projects.

The correlation between Move and Rust languages makes it easier for Solana ecosystem developers to transition to Move, helping the Move ecosystem attract more talent and drive its growth.

Analysts believe the Move ecosystem could become the next major public chain after Solana. However, it is still in its early stages and needs more time to incubate outstanding projects. The growth of the Move ecosystem will also drive blockchain innovation and bring new vitality to the industry.

3. We Social Becomes a Hot New Vertical, Entrepreneurs Seek Breakthroughs

At the TOKEN2049 conference, We Social was seen as an imaginative emerging sector. Despite repeated failures in previous attempts, more entrepreneurs are innovating in this space.

Founder Yawn introduced the concepts of “connect to earn” and map-based socializing, hoping to popularize We Social through engaging gameplay. Korean entrepreneur Taki from the Warpcast ecosystem is also exploring ways to advance We Social.

We Social is considered a potential path for blockchain products to achieve mass adoption. However, it still faces many challenges, such as designing engaging features and maintaining economic sustainability.

Analysts say that while We Social has broad prospects, it also carries high risk. Entrepreneurs need to keep innovating in product design and business models to succeed. The industry should provide enough tolerance and support to create a good environment for innovators.

4. AI+We Becomes Investor Favorite, but Most Projects Are Meme Concepts

At TOKEN2049, AI+We was seen as a hot new track for investors. However, most projects in the sector are considered meme concepts with little genuine innovation.

Primary market investor Romeo said that while the future of AI and crypto integration is bright, 98% of current AI+We applications have already been debunked. He believes a truly breakthrough AI project, comparable to Ethereum, may emerge in the future, but for now, most are meme projects.

Meanwhile, more traditional AI entrepreneurs are entering the We space, such as Gensyn and Hyperbolic, which focus on AI computing, and Schelling AI, a Web2-type project. Title.xyz is developing Midjourney-style image/video generation models.

Analysts believe that while AI+We is a new hotspot, it is still at the conceptual stage and real innovative applications will take time to emerge. Investors need to be patient and provide enough support and tolerance for entrepreneurs to foster a healthy industry environment.

IV. Economic Developments

1. Fed Slows Rate Hikes, Inflation Pressure Persists

The US economy faced a challenging year in 2025. Despite relatively strong GDP growth in the first half, inflation remained high and unemployment increased. According to the latest data, Q3 annualized GDP growth was 2.1%, down from the previous quarter. Meanwhile, the November core PCE price index rose 4.9% year-over-year, exceeding the Fed’s 2% target.

At the November Federal Open Market Committee (FOMC) meeting, the Fed raised rates by another 25 basis points, bringing the federal funds rate target range to 4.75%-5%. This was the Fed’s eighth consecutive rate hike, though the pace has slowed. Fed Chair Powell said that while inflation pressures remain severe, economic activity and the job market are cooling moderately, creating conditions for lower inflation.

Markets reacted mildly to the Fed’s decision. Investors expect the Fed to pause hikes in the first half of 2026 and begin gradual cuts in the second half. However, some analysts warn that if inflation falls slowly, the Fed may need to keep rates high for longer.

Goldman Sachs chief economist Jan Hatzius commented: “Although recent data show some easing of inflation pressures, the decline in core inflation may be slower and more complex than expected. The Fed may need to keep rates elevated for a longer period to ensure inflation eventually returns to the 2% target range.”

2. China’s Economic Recovery Accelerates, Policy Support Ramps Up

China’s economy showed signs of recovery in the second half of 2025, mainly due to a series of easing policies. Recent data show Q4 GDP grew 6.1% year-over-year, up from 5.6% in the previous quarter. Full-year GDP growth was 5.2%, in line with the government’s 5%-5.5% target range.

To counter downward economic pressure, the Chinese government and central bank implemented several easing measures in 2025, including multiple reserve requirement ratio cuts, restarting special bond issuance, and expanding infrastructure investment. The People’s Bank of China also maintained an accommodative monetary policy for several months to inject liquidity and lower corporate financing costs.

Additionally, China introduced measures to support the real estate market, such as easing home purchase restrictions and supporting developer financing. These steps helped stabilize the real estate sector and inject new momentum into the economic recovery.

Market participants are cautiously optimistic about China’s recovery prospects. CICC macroeconomist Lu Ting said: “China has emerged from the most difficult period, but still faces many uncertainties, such as geopolitical tensions and weak global demand. The continuity and strength of future policies will determine the sustainability of the recovery.”

3. ECB Tightens Further, Eurozone Slips Into Recession

The European economy suffered a blow in 2025, mainly due to the ongoing Russia-Ukraine conflict, worsening energy crisis, and high inflation. According to Eurostat, Eurozone Q4 GDP fell 0.4% quarter-on-quarter, with full-year growth at just 0.3%, well below earlier forecasts.

To curb inflation, the European Central Bank raised rates multiple times in 2025 and began reducing its balance sheet. By year-end, the ECB had raised its policy rate from 0.5% to 3.5% and indicated further tightening.

ECB President Christine Lagarde said: “Inflation remains high, far above our target. To ensure price stability, we will maintain tightening until inflation returns to around 2%.”

High inflation and tight policy have put immense pressure on Europe’s economy. Manufacturing and services PMIs have remained below the 50 mark, indicating contraction. Soaring energy prices and geopolitical tensions have also increased downside risks.

Commerzbank macroeconomist Holger Schmieding commented: “The Eurozone is already in a mild recession, which is expected to last into the first half of 2026. However, as inflation pressures gradually ease, the central bank may start to relax policy in the second half of next year.”

Overall, 2025 was a challenging year. Major economies are grappling with inflation, slowdowns, and other issues. Looking ahead to 2026, the continuity and strength of policy will determine the direction of the global economy.

V. Regulation & Policy

1. US Securities and Exchange Commission Releases Draft Crypto Asset Regulatory Framework

The US Securities and Exchange Commission (SEC) recently released a draft regulatory framework for crypto assets, aiming to establish unified rules for the crypto market. The draft, spearheaded by SEC Chair (Gary Gensler), reflects regulators’ growing focus on crypto assets.

As the top securities regulator in the US, the SEC has long sought to bring crypto assets under existing frameworks. However, the rapid development and innovative nature of crypto make it difficult for existing rules to fully cover the sector. The SEC has thus opted to create a dedicated framework to better manage this emerging market.

According to the draft, the SEC will apply unified regulation to crypto exchanges, token issuers, investment funds, and other entities. The main regulatory priorities include preventing market manipulation, enhancing disclosure, and protecting investor rights. The SEC will also strengthen cooperation with other regulators, such as the Commodity Futures Trading Commission (CFTC), to ensure regulatory consistency.

The draft has attracted widespread market attention. On one hand, industry insiders generally believe that a unified framework will benefit the long-term health of the crypto market and boost institutional investor confidence. On the other hand, some worry that excessive regulation could stifle innovation and dampen market vitality.

Expert opinions are mixed. Harvard Law Professor (Jesse Bloom) said the SEC’s draft is a step in the right direction and will help normalize crypto markets. However, he also noted that implementation must balance innovation and risk to avoid overburdening the industry.

2. UK Financial Conduct Authority Releases Crypto Asset Regulation Consultation Paper

The UK Financial Conduct Authority (FCA) recently released a consultation paper on crypto asset regulation, seeking public input on how to regulate crypto exchanges, token issuance, and related activities. This is the UK’s first official paper on crypto regulation, marking increased regulatory focus on the sector.

As the UK’s financial regulator, the FCA has long viewed crypto assets as high-risk investments and issued multiple risk warnings. But with the continued growth of the crypto market, the FCA believes a regulatory regime is needed to protect investors and maintain market order.

The consultation outlines FCA plans to regulate crypto exchanges, token issuers, investment funds, and other entities. Key measures include operational capital requirements, stricter anti-money laundering compliance, and enhanced disclosure. The FCA will also work with regulators such as the Bank of England to ensure coordinated supervision.

The paper has drawn broad industry attention. Marcus Hughes, UK Country Manager at Coinbase, said that reasonable regulation will foster the long-term development of the crypto market and that Coinbase will actively participate and provide input.

However, some are concerned about regulatory intensity. Danny Masters, founder of digital asset manager CoinShares, warned that excessive regulation could hamper innovation and weaken the UK’s fintech competitiveness.

UK Crypto Association Chair (Ian Taylor) took a neutral stance, stating that regulation aims to protect investors but should also leave room for innovation. The association will maintain close dialogue with the FCA to develop a balanced framework.

( 3. Monetary Authority of Singapore Releases Digital Token Payment Services Bill Draft

The Monetary Authority of Singapore )MAS( recently released a draft Digital Token Payment Services Bill, proposing to regulate Singapore’s crypto exchanges, wallet providers, and related services. This is Singapore’s first dedicated crypto regulation, reflecting the regulator’s focus on the sector.

As Singapore’s top financial regulator, MAS has long studied how to properly supervise the crypto market. In 2019, MAS issued a payment services act that brought some crypto activities under regulation. However, rapid market growth has rendered existing rules insufficient, prompting MAS to draft new, dedicated legislation.

According to the draft, MAS will require crypto exchanges, wallet providers, token issuers, and other entities to obtain licenses. Licensed firms must meet capital requirements, adhere to anti-money laundering rules, and enhance investor protection. MAS will also cooperate with other regulators to ensure coordinated supervision.

The draft has attracted significant industry attention. Anbhen Anand, President of the Singapore Cryptocurrency and Blockchain Association, welcomed the move as beneficial for the long-term health of the crypto market, but urged regulators to balance innovation and risk and avoid overregulation.

Some crypto exchanges also responded. Unicorn Exchange stated that it always operates in compliance and will actively cooperate with regulatory requirements. Another exchange noted that while regulation will increase operational costs, it will ultimately help build investor trust.

Zhang Yu, Associate Professor at NUS Lee Kuan Yew School of Public Policy, said the draft reflects Singapore’s prudent approach to crypto regulation. He believes that reasonable regulation will help Singapore consolidate its position as a fintech hub and attract more crypto businesses.

In summary, Singapore’s Digital Token Payment Services Bill aims to establish a clear regulatory framework for the crypto market, maintain market order, and protect investor rights. While it will have some impact on the industry, most insiders believe that reasonable regulation will benefit the long-term development of the crypto market.