Crypto traders were in for a big surprise Monday morning Asia time when Bitcoin dropped by over 3% to the $86k mark following a hack on DeFi aggregator Yearn Finance. Ethereum also fell 5% to $2,831 earlier this morning.
Despite last week’s recovery following a brutal November, CoinMarketCap’s Crypto Fear and Greed Index still stands at 20, indicating continued apprehension from traders as they head into the last few weeks of the year.
Yearn Finance (YFI) is a relatively large DeFi aggregator that lets users stake, earn, and borrow funds on DeFi protocols such as Aave, Compound, and Curve; users have locked over US$415 million in assets on the platform.
While media reported that the hacker only made off with a few million dollars in assets, the FUD could spark a massive cycle of unstaking, withdrawals, and selling that could spread throughout the DeFi ecosystem. It also raises questions as to how safe DeFi aggregators such as Yearn Finance really are.
What Traders Should Watch Out for this Week
This week, we expect volatility leading up to the big Fed meeting on December 9-10.
A number of economic datasets will be released, which will shape Fed policy decisions on the 9th. The S&P final manufacturing PMI and ADP employment data will be released on December 1, the S&P final services PMI on December 3, and year-over-year PCE data will be out on December 5.
The odds of a third rate cut have changed multiple times over the past few weeks after the Fed lowered its benchmark rate to a target range of 3.75%–4.00% in October; another cut could spike market prices again. Critics who are wary of further cuts point to continued risks of inflation and the rising cost of living in the US.
The Federal Reserve is also due to stop the reduction of its aggregate securities holdings on December 1 U.S. time, meaning that the Fed could start moving towards quantitative easing, another way to expand the money supply and stimulate the economy.
Regardless of what happens on December 9, traders are optimistic about rate cuts as Trump mentioned to the media over the weekend that he has already decided on a new Fed chairman. Trump’s contempt for the current Fed chairman for not cutting rates sooner is well-known, and it’s likely that his choice will continue to cut rates, pushing markets even higher.
Halfway around the world, China’s PMI for November was announced at 49.2, marking an eighth straight month of declining factory activity. Traders and economists have been bearish on China’s economy for some time already; the pervasive pessimism has driven Chinese investors to buy gold en masse. Many believe that Chinese buying of Bitcoin could also accelerate as the economy continues its downturn.
All of the above factors have the potential to impact markets as we head into the last few weeks of the year.
Keep an eye out for what happens next—big shifts could be ahead.
