Firi Weekly: Japan Rate Signals Shake Crypto

Bitcoin Drops 6.28% on Japan Rate-Hike Fear:
- A six-hour overnight selloff followed after Japan's central bank indicated a likely December rate increase, triggering concerns about imminent forced crypto selling.
Klarna Plans Dollar Stablecoin Launch in 2026:
- The Swedish fintech, which has 114 million customers, will launch KlarnaUSD on the Tempo blockchain, marking a significant reversal from its previously anti-crypto stance.
S&P Downgrades Tether to Lowest Rating:
- Rating agency S&P cut the world’s largest stablecoin, Tether (USDT), from score 4 to 5 (“weak”), citing higher-risk reserve assets and disclosure gaps. This is particularly notable given Tether's $184 billion market size.
Amundi Launches Ethereum Money Market Fund:
- Europe's largest asset manager has entered crypto with a blockchain-based fund, citing instant execution and 24/7 operations as key advantages.

Last Week’s Big Three

Klarna Announces Dollar Stablecoin for 2026: Klarna, the Swedish fintech company best known for its "buy now, pay later" service, announced plans to launch a dollar-denominated stablecoin in 2026. The token, KlarnaUSD, will be built on Tempo, a new blockchain developed by payments company Stripe and crypto venture fund Paradigm. The stated goal is to deliver faster, cheaper payments for Klarna's 114 million global customers.

The announcement represents a significant shift in Klarna’s stance, which had previously been highly critical of cryptocurrency. The skepticism was largely driven by the company’s CEO, Sebastian Siemiatkowski, who had expressed doubts about digital assets, making Klarna’s new embrace of crypto all the more striking. To the management’s credit, they do not downplay their history as crypto skeptics but instead openly acknowledge their change in stance. This is a refreshing approach.

S&P Cuts Tether to Lowest Possible Rating: S&P Global Ratings lowered its assessment of Tether (USDT), the world’s largest stablecoin, from score 4, described as constrained, to score 5, classified as weak. The latter is the lowest possible rating. The agency pointed to two concerns: an increasing allocation to higher-risk assets in Tether's reserves and ongoing gaps in the company's public disclosures. Tether has pushed back against the report's conclusions.

Tether's transparency issues are not new, but what is drawing fresh scrutiny is the company's apparent shift toward riskier reserve assets. Reports indicate growing exposure to bitcoin, gold, and corporate bonds, a departure from the U.S. Treasury securities that back most competing stablecoins. With over $184 billion in circulation and a central role in crypto markets, any instability at Tether would ripple across the entire digital asset ecosystem. This is a risk worth monitoring closely.

Amundi Brings Money Market Fund to Ethereum: Amundi, the French firm that ranks as Europe's largest asset manager by assets under management, announced Friday that it is launching a money market fund on the Ethereum blockchain. The fund is being issued in partnership with CACEIS, a major asset servicing provider. Amundi cited instant settlement and 24/7 operational capability as primary motivations for choosing a blockchain-based structure.

The move reflects a broader trend: Europe is steadily closing the gap with the U.S. on institutional crypto adoption. For years, American firms led the way, but the European Union's Markets in Crypto-Assets Regulation (MiCA), a comprehensive regulatory framework for digital assets, has created clearer rules of the road for institutions. That regulatory certainty is driving greater adoption of crypto assets and public blockchains among European financial institutions, whereas the U.S. is still working through its own regulatory framework.

Behind the Charts

Chart 1: The Markets’ Expectations of an Interest Rate Cut Next Week

The Federal Reserve (Fed), the U.S. central bank responsible for monetary policy, meets on Wednesday, December 10 to set the path for interest rates. Current market pricing shows an 89.2% probability of a 25 basis point (0.25%) rate cut, with only a 10.8% chance the Fed holds steady.

Assuming the U.S. economy maintains its current strength, a rate cut would likely be positive for crypto. Lower rates tend to push investors toward higher-risk assets as the opportunity cost of holding safer investments declines. The key caveat is economic health: rate cuts driven by weakness rather than inflation progress would tell a different story.

Chart 2: Strategy’s Price to Net Asset Value (NAV)

Strategy (formerly MicroStrategy), by far the largest corporate holder of bitcoin, traded at a discount to its net asset value (NAV) last week for the first time in years. Put simply, the company's market capitalization briefly fell below the value of its bitcoin holdings, meaning investors could theoretically buy the stock and gain exposure to more bitcoin than the equivalent dollar amount would purchase directly. At its widest, the discount reached roughly 5% before shares recovered to trade roughly at parity with the underlying bitcoin value.

The discount matters because of what it might signal. Strategy holds approximately 650,000 bitcoin, representing about 3.25% of total supply. When the stock trades below NAV, shareholders have a theoretical incentive to push management toward selling bitcoin and repurchasing shares, a form of arbitrage that would unlock the discount. Whether that pressure materializes remains to be seen, but the market is clearly nervous about the possibility of forced or strategic bitcoin sales from such a concentrated holder.

A Number to Remember

6,28 %

Between Sunday night (November 30) and early Monday morning (December 1), bitcoin dropped 6.28% in the span of just six hours. No crypto-specific catalyst drove the move. Instead, the selloff appears tied to developments in Japan, where the Bank of Japan indicated that a December interest rate hike for the yen is likely.

The connection to crypto runs through the yen carry trade. Because Japanese interest rates have historically been far lower than rates in most other developed economies, investors have borrowed cheaply in yen to fund purchases of higher-yielding foreign assets, including crypto. A rising yen rate changes the economics of that trade, potentially forcing carry trade participants to unwind positions and sell assets to repay yen-denominated loans. Sunday’s price action suggests the market feared it could lead to selling pressure in crypto.

On Our Radar

On our radar for the week ahead:

Strategy's Valuation Dynamics: We are watching closely to see whether Strategy continues trading near or below its bitcoin NAV. Persistent discounts would raise questions about potential bitcoin liquidations and signal broader risk appetite concerns for the crypto market.
Fed Signals Ahead of December 10: Any communication from Fed officials this week, or significant economic data releases, could shift market expectations around next week's rate decision. A meaningful change in rate cut probabilities would likely move crypto prices.
ETF Flow Reversal: After substantial outflows from U.S. spot Bitcoin and Ethereum exchange-traded funds (ETFs) earlier in November, last week brought net inflows and renewed buying pressure. We will be tracking whether this positive momentum continues or proves short-lived.

Mads Eberhardt

Written 03/12/2025

Should not be considered financial advice. Crypto may involve high risk.