Federal Reserve Cuts Rates, but Bitcoin Pulls Back Below $100K After Powell's Comments on BTC Reserve

Takeaways

• Nasdaq adds Microstrategy, making it the first bitcoin-focused firm in the index: Analysts see this as a potential precursor to potential S&P 500 inclusion, contingent on the adoption of new accounting standards.
• Bitcoin pulls back below $100,000 after rate cut: The Federal Reserve cut rates by 25 basis points Wednesday but chair Jerome Powell said it could not create a bitcoin reserve under current laws.
• Crypto investment products recorded $3.2 billion in inflows last week, driven by strong interest in bitcoin and renewed optimism around XRP ETFs: Bitcoin has accounted for roughly 87% of the growth in inflows.
• The US sanctioned two Chinese nationals and a UAE-based company linked to North Korea's crypto-laundering operations: The network is accused of funneling illicit funds into the country’s nuclear weapons program.

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MicroStrategy Joins Nasdaq 100, Eyes Potential S&P 500 Inclusion

MicroStrategy (MSTR) will officially join the Nasdaq 100 index on Monday, becoming the first bitcoin-focused company to gain this status. The inclusion results from Nasdaq's annual rebalancing, based on market capitalizations as of the last trading day in November, when MicroStrategy's valuation stood at $92 billion. Analysts estimate MicroStrategy will hold a 0.47% weight in the index, equating to about $2.1 billion in ETF-driven buying.

While this milestone opens MicroStrategy to significant passive fund inflows, speculation is growing about its potential inclusion in the S&P 500. The company meets market cap and trading volume requirements but falls short on profitability criteria. New Financial Accounting Standards Board (FASB) guidelines effective in 2025 could allow MicroStrategy to reflect bitcoin holdings at fair value, potentially boosting earnings.

MicroStrategy seems to be continuing its aggressive bitcoin acquisition strategy, purchasing 15,350 BTC this week to hold a total of 439,000 BTC, worth over $45 billion.

Bitcoin Pulls Back Below $100K After Powell’s Comments

Bitcoin surged to an all-time high of over $108,000 this week before retreating below $100,000 Thursday as the Federal Reserve opted to cut rates by 25 basis points in a widely expected move. The central bank said it now projects to cut rates twice in 2025, down from four.

The move reflected a stronger-than-expected economy and inflationary challenges. CPI rose to 2.7% this month, slightly above the Fed’s original target. A more hawkish stance could strengthen the US dollar and Treasury yields, potentially cooling enthusiasm for more risk-associated assets like bitcoin.

Federal Reserve chair Jerome Powell also said The Fed is not allowed to own bitcoin, dampening hopes that president-elect Donald Trump will be able to set up a strategic bitcoin reserve.

"We’re not allowed to own Bitcoin,” Powell said. “The Federal Reserve Act says what we can own, and we’re not looking for a law change. That’s the kind of thing for Congress to consider, but we are not looking for a law change at the Fed."

Despite potential headwinds, bitcoin’s rally is supported by optimism surrounding Trump's crypto-friendly policies. This, coupled with Gary Gensler’s recent resignation as chair of the SEC, continues to bolster the long-term bullish narrative.

Crypto Inflows Surge to $3.2B, Led by XRP ETF Hopes and Bitcoin Dominance

Digital asset investment products attracted a hefty $3.2 billion in inflows last week, continuing a months-long surge. Year-to-date inflows now total over $45 billion, quadrupling the previous record, with Bitcoin dominating the market by capturing around 87% of all inflows. The rally has been bolstered by the launch of spot bitcoin ETFs and in part by pro-crypto sentiment following Donald Trump’s election as US President.

Ethereum products also set a new inflow record last week, with significant inflows of $1 billion. Analysts have suggested Ethereum’s network could benefit similarly to Bitcoin from legislative advancements encouraging decentralized applications and the growing traction of memecoins.

XRP, meanwhile, drew $145 million in inflows, pushing its year-to-date total to $421 million. The token's price has soared nearly fourfold since Election Day, fueled by speculation around a potential US-listed XRP ETF.

Ripple Labs added momentum by announcing the RLUSD stablecoin, set to launch on both Ethereum and XRP Ledger, further expanding its reach in the $200 billion stablecoin market.

US Sanctions North Korea's Crypto Laundering Network

The US Treasury Department has imposed sanctions on individuals and an entity connected to North Korea's cryptocurrency laundering operations. Two Chinese nationals, in addition to Green Alpine Trading, a UAE-based front company, allegedly facilitated the transfer of illicit funds to support the regime’s nuclear weapons programs.

According to the Office of Foreign Assets Control (OFAC), the DPRK has increasingly relied on proxies to bypass international financial restrictions. Activities include fraudulent IT services, major digital asset heists, and sophisticated money laundering schemes. A notable example is the $600 million hack of the Ronin Ethereum sidechain in 2022, linked to the notorious Lazarus Group.

Reports indicate that North Korea’s state-backed hacker groups generate up to 50% of the nation’s foreign currency, much of which funds its weapons of mass destruction and missile development initiatives. Cybersecurity firm SlowMist has also uncovered tactics where hackers impersonate executives to exploit LinkedIn users with malicious links. The sanctions underline escalating efforts to curb North Korea’s illicit use of cryptocurrency, emphasizing its role in global cybersecurity threats and geopolitical instability.

A Big Thank You To Weekly Market Update Readers

This will be the last Weekly Market Update we release in 2024. Thank all of you for reading over this past year. We’re excited to bring you all the latest crypto news again in 2025. Happy holidays!

-The Gemini Team