Data Delays & Defensive Tilts

Key takeaways for the month

The year closed with cautious easing and ongoing market-structure upgrades. The FOMC cut rates by 25 bps, while meeting minutes revealed a deep divide among voting members of the committee. Bitcoin remained choppy and range-bound, oscillating around $90k, as risk-off sentiment persisted. The month was shaped by a swath of key macro releases, including a surprisingly strong GDP print and softer-than-expected inflation alongside delayed payrolls and retail sales, blurring the growth-inflation picture amid seasonally low liquidity and year-end tax-loss harvesting. With visibility low, investors de-risked: flows turned selective, relative strength narrowed to mega-caps, and bid-ask depth thinned across higher-beta tokens. Implied and realized volatility compressed relative to last month, consistent with low-conviction investor sentiment, while discretionary risk budgets were conserved pending cleaner data and clearer guidance on the 2026 easing path.

Higher Beta, Deeper Drawdowns: Index performance reflected this defensive posture. The CF Ultra Cap 5 Index fell 4.63% month-to-date (YTD: −11.24%), while the CF Free-Float Broad Cap and CF Diversified Large Cap declined 5.11% (YTD: −15.25%) and 6.72% (YTD: −22.14%), respectively. Higher-beta cohorts led losses: CF Smart Contract Platforms −13.44% (YTD: −50.00%), CF DeFi −12.02% (YTD: −54.25%), and CF Digital Culture −22.90% (YTD: −74.26%). Mega-caps again proved relatively resilient, but the complex finished the year materially lower across risk tiers, with leadership narrowly concentrated in the most liquid, institutionally held names.

Individual Movers: Bitcoin Cash (BCH) led the pack in December with a 9.0% monthly gain, supported by renewed network attention tied to inscription activity. The Blue chip DeFi protocol Maker (MKR) followed, up 2.5%. Tezos (XTZ) rounded out the top performers with a 2.0% advance, helped by a late-month upgrade aimed at higher throughput and faster confirmations. Fantom (FTM) was the weakest performer, down 43.7%, pressured by ecosystem liquidity/TVL erosion. Internet Computer (ICP) fell 25.9%, weighed by lingering a supply unlock overhang. ApeCoin (APE) declined 25.7% as governance uncertainty and ongoing token supply dynamics continued to dampen sentiment.

Outflows Persist: December recorded further outflows from digital asset funds, with investors redeeming approximately $687 million. Ether accounted for the largest share at $275 million, while Bitcoin followed at $204 million. Regionally, North America drove the majority of redemptions at roughly $985 million, while Europe experienced inflows of $175 million, underscoring the concentration of selling pressure in U.S. markets.

Mixed Signals Across Futures Markets: Bitcoin futures saw a modest decline in open interest during November, falling 11.7% from 14,029 to 12,383 contracts. Ether futures recorded a notable increase, with open interest rising 14.9% to 18,452 contracts, despite a modest decline in trading activity that peaked at 79,818 contracts toward month end. Meanwhile, Solana and XRP futures posted smaller changes following November’s pullback. Solana’s open interest rose 5.3% to 11,067 contracts as volumes approached 48,000 contracts, while XRP’s open interest declined 1.3% to 5,671 contracts, with volumes edging modestly higher.

Bitcoin Volatility Compresses: The CF Bitcoin Volatility Index Settlement Rate (BVXS) is a daily benchmark that provides a forward-looking, 30-day constant-maturity measure of implied volatility, derived from CFTC-regulated Bitcoin option contracts traded on the CME. The BVX reflects the fair strike of a variance swap. Over the past month, the BVX ranged between 42.8 and 55.3. During this period, volatility declined significantly, with the BVX recording a -1.7 sigma move (based on our rolling 30-day z-score) late-month.

DeFi TVL Stabilizes After November Drawdown: Total Value Locked (TVL) in decentralized finance (DeFi) represents the aggregate value of assets deposited across DeFi protocols, expressed in U.S. dollars. It serves as a key indicator of the sector’s overall health and growth. Over the past month, total DeFi TVL increased by 1.2% to approximately $328 billion, as Ether and Solana began to stabilize following their November pullbacks.

Miner Revenue Slips as Price Pressures Persist: Bitcoin miners saw a 4.7% decrease in revenue in December. Of the total rewards earned during the month, 0.6% came from transaction fees, down from 0.7% in November. The slight decline in revenue was driven primarily by Bitcoin’s price movements during the period.

DEXs Still Dominate as Fees Compress: Analyzing Ethereum’s total fees and their sector composition provides insight into the use cases driving network revenue. Ethereum layer-1 fees dropped 51.2% month-over-month, falling to $11.5 million in December from $23.6 million in November. Decentralized exchanges accounted for the largest share at 30.7%, followed by lending protocols at 29.0% and liquid staking at 21.9%. Derivatives contributed 16.9%, while real-world asset tokenization represented just 1.5%, underscoring the continued dominance of DEX activity in network fee generation.

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