The Fed And Crypto Are More Connected Than You Think 🧠

The Fed And Crypto Are More Connected Than You Think 🧠

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OVERVIEW

The Fed And Crypto Are More Connected Than You Think 🧠 

Before we dive in, here’s today’s crypto market heatmap:

Source: Santiment

And here’s a look at crypto’s total market cap chart:

Source: TradingView

NEWS IN THREE SENTENCES
Crypto News 📰

🛑 Aerodrome Flags Suspicious Trading

Aerodrome says the launch of $VVV triggered an internal alert on some suspicious trading, leading to swift action within hours. Two contributors got suspended, and the investigation is still ongoing. They’re making it crystal clear that ethical standards come first—or heads roll. Aerodrome blog.

🏎️ Injective EVM: A Racecar Among Go-Karts

They claim it outperforms top EVM chains by miles, smashing up to 800 TPS on normal load and 20k with fancy bundling. They also jammed in an AI-ready environment, so your DeFi bots can get real-time stonks predictions onchain. Basically, it’s an EVM fever dream—if they deliver on half the hype, your old chain might suddenly feel like dial-up. Injective Protocol blog.

🚨 South Dakota & Kentucky Join The “Bitcoin Reserve” Party

Lawmakers in both states want their piece of the BTC pie with new legislation aimed at starting a strategic Bitcoin reserve. It’s part of a wave of states trying to jump ahead of federal plans, which only recently popped up after Trump signed an executive order on Jan. 23. If these bills pass, that makes 14 states with official Bitcoin legislative efforts—government HODLing might actually become a thing. CryptoSlate.

📉 Bitcoin Ordinals Crash: Lowest Levels Since Pre-Explosion

Remember when everyone was shouting “Bitcoin NFTs” from the rooftops? Now top Ordinals projects like Bitcoin Puppets and NodeMonkes are nose-diving in both price and volume. Only bright spot is Quantum Cats at .25 BTC, but that’s still half of what it was months ago. TheDefiant.

⚖️ Senator Lummis: SEC, Stop “Legislating By Enforcement”

Senator Cynthia Lummis filed an amicus brief in a major SEC case, saying the agency’s approach to digital assets is all wrong. She thinks Congress (read: her and her colleagues) should be the ones creating rules for crypto, not the SEC shoehorning tokens into 1930s securities laws. Her message: enough of the “enforcement first, clarity maybe later” routine. Sen. Lummis.

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POLICY
The Fed And Crypto ⚖️ 

There was a time when what the Fed did had really no effect on the crypto market. But that is no longer the case. Crypto has matured, and what the Fed does (or doesn’t) can affect the crypto market.

So, why does the Fed matter to crypto now? The top three reasons are fairly well known – but there are some others you might not.

The Common/Most Understood Reasons 📰 

  • Interest Rates = Market Mood Swings
    Every time the Fed announces rate changes, crypto traders start biting their nails. Higher rates, less risk appetite; lower rates, risk party time.

  • Inflation Hysteria
    When prices for, well, everything, start going nuts, the Fed prints money or hits the brakes. Crypto folks react like caffeine addicts at 3 a.m.—frantic, sweaty, and convinced that Bitcoin solves it all.

  • Regulatory Overhang
    The Fed’s policy stance influences other financial watchdogs. If the central bank sneezes, entire swaths of the crypto market catch a cold. Plain as day.

Ten “I never thought of that” Reasons 🗞️ 

  • Stablecoin Dependency

    Plenty of stablecoins pegged to the U.S. dollar. You’re basically trusting the Fed’s monetary policy every time you trade a stablecoin pair. Let that sink in.

  • Repo Market Rumbles

    The repurchase (repo) market is how big banks keep their liquidity balanced. Changes there ripple into crypto liquidity because big institutions don’t stop at just stonks—now they dabble in digital assets, too.

  • Fed Balances and Bitcoin’s Scarcity

    The Fed’s balance sheet expansions remind people that Bitcoin’s supply doesn’t just magically inflate. Suddenly, that 21-million cap looks a lot more appealing.

  • Offshore Dollar Demand

    Emerging markets often hoard dollars like they’re going out of style. More global demand for USD means more reason for stablecoins to be an on-ramp to crypto. It’s a weird cycle of demand fueling demand.

  • Same Puppet Masters

    The Fed’s open market operations prop up the stonk and bond markets, and guess who’s also in those markets playing with your tokens? Yep. Same money, different shiny object.

  • Collateral Gymnastics

    Crypto assets are inching into the collateral conversation for loans. The moment the Fed loosens or tightens lending standards, the trickle-down hits those pledged Bitcoin balances.

  • Stablecoin Reserves

    Some stablecoins park money in ultra-safe T-bills. That’s basically mooching off Fed rate changes. Higher yields on T-bills could mean better stablecoin yields—win-win, unless it’s all gone tomorrow.

  • Shadow Banking Creeping

    DeFi is a shadow banking system. The Fed has a love-hate relationship (mostly hate) with anything that echoes traditional finance minus the oversight. It’s like they’re watching their rebellious teenager from the corner of their eye.

  • Crypto-Fed Talent Crossover

    Former Fed folks are cozying up to crypto firms, bringing insider knowledge of monetary policy. When the ex-central bankers start playing in your backyard, you know the lines are blurring.

  • Treasury Market Rifts

    If the Fed mismanages Treasury yields (it happens), foreign investors look for alternative stores of value. Crypto just waves hello from across the table like an opportunistic sidekick.

FUTURES & OPTIONS
What The Hell Is Thi… I Don’t Even… 😕 

You might have heard that the CME (Chicago Mercantile Exchange) is coming out with options on its Bitcoin Friday Futures contract. But if you’re like me, you probably never heard of or paid attention to the BFF. No shitting you, that’s the ticker/symbol.

Let’s break this down:

WTF is a BFF? 🤔 

  • Short-dated, cash-settled Bitcoin futures that expire every single Friday.

  • Each contract represents 1/50 of a BTC. Perfect for those who want to dabble without selling a kidney.

  • It’s cash-settled, which means no one’s trucking around actual BTC on expiration day.

CME’s Latest Trick: Options On BFF 📜 

Starting February 24, you can trade daily expiring BFF options from Monday to Friday. Five potential chances each week to guess if Bitcoin’s going up, down, or sideways. Options are financially settled, so again, there is no tangling with actual BTC.

And because these contracts are smaller in size, they might be a bit friendlier on your capital. It’s an a la carte approach to hedging: pick your day, pick your strike, and hope you’re wrong less than you’re right. 👍️

Why Options? ⁉️ 

  1. Defined Risk – Options let you dial in how much you’re willing to lose. A little bit of risk or a lot—it’s your call.

  2. Volatility Playground – If you enjoy chaotic price moves, you can trade volatility itself. For some folks, volatility is basically a love language.

  3. Hedging 101 – Protect that giant BTC position from short-term crashes. Or at least try.

  4. Strategic Flexibility – You can buy calls, buy puts, write calls, write puts, do spreads, do straddles, do strangles—yes, it’s a never-ending list. And one more, I promise: the Iron Condor.

  5. Lower Capital Outlay – Sometimes it’s cheaper to buy an option than to buy the futures contract outright. Emphasis on “sometimes.”

  6. Speculation – If you’d rather guess short-term movements than huddle for dear life, options hand you that chance.

  7. Short-Term Trades – Daily expiries mean you’re not stuck waiting a month to see if you’re a genius or broke.

  8. More Liquidity (Potentially) – An active options market can mean tighter spreads.

  9. Cash Settlement – No ‘physical’ Bitcoin changing hands.

  10. Bragging Rights – Trading daily options on a weekly futures product has a certain flair. You’re basically living on the cutting edge of derivatives.

NEWS IN THREE SENTENCES
Metaverse, NFT, & Gaming News 🎮️

🚀 GM NFT Upgrades: The Path to Galaxy Tier

VeBetterDAO’s letting you level up your GM NFT tier like it’s an RPG—first Earth, Mercury, next thing you know you’re Saturn or Galaxy. Nodes get certain freebies, everyone else coughs up $B3TR, which ironically might actually “betta” your wallet. VeChain blog.

🏙️ Metropolis: AI Agents Get Their Own Reality

Built on Saga’s Chainlet tech, Metropolis is where competing AI agents stake tokens on their version of “truth.” Prediction markets, modular personalities, and big-brain collaborations are all baked in. No humans needed—just a bunch of robots duking it out for cosmic economic supremacy, with Saga’s infrastructure powering the whole show. SAGA blog.

Theta EdgeCloud + DeepSeek-R1 LLM = Lean, Mean AI

DeepSeek claims you can run an entire cutting-edge LLM on a half-broken GPU, which is perfect for Theta’s decentralized GPU cloud. It’s a big “sorry not sorry” to those central server farms hogging all the power. If you fancy yourself an AI hobbyist with a gaming PC, you, too, can join the new AI arms race from the comfort of your basement. Theta Labs blog.

NEWS IN THREE SENTENCES
DeFi, DEX, and Lending Protocol News 🏦

1inch On Fantom: Quick, Scalable, Cheap… And Not Ethereum

They promise near-instant finality, so you won’t be grabbing a snack waiting for confirmations. It’s EVM-compatible, meaning devs can copy-paste their code from Ethereum and call it innovation. 1inch integrated them ages ago, so if you’re looking for a place to YOLO trades on a new chain, you found it. 1inch blog.

🔮 UMIP 183: One Oracle Request, Multiple Values

UMA’s “MULTIPLE_VALUES” price identifier means you can ask one question and get up to seven answers in one shot—like streaming NBA scores in a single function call. Less gas, fewer headaches, more streamlined nerdy sports bets. If you’re tired of paying for 40 separate oracle requests just to figure out who won last night, UMA’s got you. UMA Blog.

🪙 The Role of RWAs in the Future of Finance

Tokenized real estate, debt, and gold are busting through old-school financial barriers, letting you own fractions of stuff you could never afford in real life. Polymesh’s compliance-first design tries to keep shady characters out, so you can buy your micro-slice of a penthouse without the legal nightmares. It’s your chance to own 0.0001% of everything, which is apparently how we democratize finance now. Polymesh blog.

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Author Disclosure: The author of this newsletter holds positions in ADA, LTC, IMX, WMT, COPI, MIN, AGIX, ALGO, DOGE, ZEC, AVAX, XLM, XTZ, and NEAR. 📋





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