Crypto Market Drops: BTC and ETH Lead Double-Digit Declines Amid Regulatory Shifts

I. Crypto Market Overview

Key Takeaways

Macro Environment

The UK, Germany, and 47 other countries have launched automatic crypto tax reporting, increasing compliance and regulatory scrutiny. Barclays expects Fed rate cuts in March and June 2026, potentially boosting crypto liquidity. Turkmenistan legalized crypto mining and exchanges under strict oversight, reflecting cautious regulatory openness.

Crypto Market

The crypto market saw broad declines over the past 12 hours, with BTC down 4.43% to $97,474 and ETH falling 9.27% to $3,144.86, pressured by weak risk sentiment and ETF outflows. Leading altcoins PEPE (-11.16%), SPX6900 (-10.41%), and FLOKI (-11.10%) posted double-digit losses, driven by risk-off flows and lack of new catalysts.

Today's Outlook

DoubleZero (2Z) will unlock 139M tokens, about 4% of supply, today, potentially increasing inflationary pressure and impacting price. No other major token unlocks or high-impact events are scheduled for January 2, 2026, based on available data.

Fear and Greed Index

54.00% Annual Percentile

31 Fear

Total Crypto Market Cap

$3.03T

1.92%

Total Market Trading Volume

$79.91B

3.73%

Altcoin Season Index

75.00%

Quarterly Percentile

21 / 100

Total Futures Market Open Interest

2.98B

17.64%

Futures

759.65B

7.34%

Perpetuals

II. Industry Updates

Macro-economic Policies

Barclays expects the Federal Reserve to cut interest rates by 25 basis points in both March and June 2026, which could boost crypto market liquidity and support BTC price stability.

Falling UK inflation and the prospect of rate cuts in 2026 may strengthen GBP and risk assets, potentially increasing institutional flows into DeFi and digital assets.

China is doubling down on its export-led growth model despite domestic deflation, which may support global risk appetite and indirectly benefit crypto market sentiment.

The US is set to reduce proposed tariffs on Italian pasta after a Commerce Department review, easing trade tensions and potentially improving global macro conditions for crypto adoption.

Central banks are increasing direct gold purchases to curb smuggling, which may signal rising demand for alternative assets and support the narrative for Bitcoin as digital gold.

Cryptocurrency Regulatory Trends

The UK and 47 other countries have begun collecting crypto tax data under the Crypto-Asset Reporting Framework (CARF), increasing regulatory scrutiny and requiring exchanges to report user transactions and tax residency.

Turkmenistan's new crypto mining law took effect on January 1, 2026, legalizing mining and exchanges under strict central bank oversight, signaling cautious regulatory openness but maintaining tight government control.

Bitwise Asset Management filed for a new ETF covering 11 altcoins, reflecting growing regulatory acceptance of diversified crypto investment products and potentially boosting institutional participation.

US SEC Commissioner Caroline Crenshaw, known for her critical stance on crypto, has resigned, potentially signaling a shift in the SEC's regulatory approach and impacting future enforcement priorities.

Germany has implemented automatic crypto transaction reporting to tax authorities starting in 2026, aligning digital asset taxation with traditional finance and increasing compliance requirements for platforms and investors.

PEPE (PEPE): Surged over 22% in the last 24 hours, leading memecoin momentum with $1.4B volume; breakout above key resistance driven by strong social engagement and bullish technicals.

Based SPX6900 (SPX6900): Ranked among top gainers with a 19% 24h increase on CoinMarketCap; community sentiment and bullish outlook for 2026 fueled by active social media and meme coin rotation.

FLOKI (FLOKI): Rose nearly 16% in 24 hours, supported by strong channel support, active community marketing, and ongoing NFT, gaming, and DeFi initiatives; trading volume exceeded $112M.

Smart Money Movements

BlackRock deposited $123.47 million in digital assets to Coinbase, including 1,134 BTC ($101.37M) and 7,255 ETH ($22.1M), signaling increased institutional engagement.

Tether acquired 8,888 BTC worth approximately $779 million, raising its total Bitcoin holdings to over 96,000 BTC and solidifying its position among the top five global holders.

A whale withdrew 800 BTC valued at $70.9 million from Bitfinex, increasing its total Bitcoin holdings to 1,000 BTC ($89.04 million) over the past six days.

Bitmine purchased 32,938 ETH for $97.6 million and staked an additional 118,944 ETH worth $352 million, bringing its total Ethereum holdings to over 4 million ETH ($12 billion).

A single entity acquired 3,102 XAUT tokens valued at $13.72 million via six wallets, with each token purchased at $4,422, according to Nansen AI data.

Events to Watch

Jan 2 (Fri)

DoubleZero (2Z) will unlock 139M tokens, about 4% of supply, potentially impacting price due to inflationary pressure.

Jan 6 (Tue)

US ISM Non-Manufacturing PMI for December 2025 will be released, influencing USD index and economic outlook; Hyperliquid to release 1.2M HYPE tokens as part of monthly distribution.

Jan 7 (Wed)

Stellar Protocol X-Ray launches on testnet, introducing native BN254 and Poseidon for more efficient ZK privacy apps.

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