12.14 AI Daily Global Financial Markets Fluctuate: Federal Reserve Rate Hike, Brexit, and Cryptocurrency Volatility

Part I. Headlines

1. Federal Reserve Raises Interest Rates by 75 Basis Points, Triggering Volatility in Global Markets

At the December 14th policy meeting, the Federal Reserve announced a further rate hike of 75 basis points, raising the target range for the federal funds rate to 4.25%-4.5%. This marks the seventh consecutive rate increase by the Fed and the largest single hike since 1994.

Fed Chair Jerome Powell stated at the press conference that inflation pressures remain severe and are expected to peak in the first half of 2023. To bring inflation down to the 2% target, the Fed will continue to tighten policy, with multiple rate hikes expected in 2023.

This rate hike exceeded market expectations and caused intense turmoil in global financial markets. U.S. stocks plunged sharply, with the Dow Jones Industrial Average falling nearly 800 points, the largest single-day drop since March 2020. The US dollar index surged over 1%, breaking the 105 level. International oil prices fell over 5%, and gold futures declined nearly 2%.

Analysts pointed out that the Fed’s determination has heightened fears of a hard landing for the economy. It is projected that the global economy could enter recession within the next year, with corporate profits and employment deteriorating. While inflation has cooled somewhat, it remains elevated. The ongoing rate hikes are likely to lead to synchronized tightening of monetary policies worldwide, worsening financial conditions and hitting emerging markets hard.

2. UK’s New Prime Minister Sunak Declares “坚持脱欧” (坚持脱欧 -坚持脱欧)

UK’s newly appointed Prime Minister Rishi Sunak announced at his first cabinet meeting on December 14th that the UK will “坚持脱欧,” and plans to unveil a new “脱欧方案” (Brexit plan) in the coming weeks.

Sunak stated that Brexit is a “victory for democracy,” reflecting the will of the people. He pledged to rebuild a “mature, mutually respectful partnership” with the EU and seek new agreements in trade, immigration, and other areas.

Sunak’s remarks prompted strong reactions from the EU. European Commission President Ursula von der Leyen warned that the UK cannot “renegotiate” the already agreed Brexit deal, or face “serious consequences.”

Analysis indicates that the UK’s firm stance on Brexit will further strain UK-EU relations. Major disagreements remain over core issues such as the Northern Ireland protocol, and trade disputes could intensify. The UK economy is already on the brink of recession, with post-Brexit recovery sluggish. Sunak’s government faces significant challenges.

Meanwhile, the EU also faces risks of internal division. Several member states have expressed understanding of the UK’s stance and called for a more flexible, pragmatic approach in negotiations. Internal tensions within the EU may further weaken its influence on the global stage.

3. Elon Musk Says He Will Resign as Twitter CEO

On December 14th, Elon Musk tweeted that he would step down as Twitter CEO once he finds a “sufficiently foolish” successor.

After acquiring Twitter for $44 billion in October, Musk took over as CEO. However, his appointment faced widespread skepticism, with critics citing a lack of relevant experience.

Since taking office, Musk has implemented sweeping reforms, including mass layoffs, restoring accounts of Trump and others, and launching a paid subscription service, sparking controversy. Twitter’s ad revenue and employee retention have suffered, and the company has experienced instability.

Analysts believe that Musk stepping down could help Twitter return to normal operations. However, whether Twitter can regain growth momentum depends on the new CEO’s management capabilities.

Additionally, Musk is CEO of multiple companies, including Tesla and SpaceX, and is accused of being spread too thin. Whether he can focus on other businesses after resigning from Twitter remains a focus of market attention.

Overall, Musk’s decision to acquire Twitter contains impulsive and reckless elements, bringing uncertainty to Twitter and affecting his performance in other ventures. His ability to resolve this issue properly will determine his reputation and influence in the tech industry.

4. China Releases Revised “Internet Rules” to Strengthen Data Regulation

On December 14th, China’s Cyberspace Administration and seven other departments jointly issued the “Internet Information Service Algorithm Recommendation Management Regulations( (Draft for Comments)),” regulating algorithm recommendation services and strengthening oversight.

The new regulation explicitly requires providers of internet information services to follow principles of fairness and justice, and prohibits using algorithms for illegal activities such as endangering national security or disrupting economic order. It also mandates that relevant companies establish algorithm assessment mechanisms and accept government oversight.

Analysis suggests this move aims to enhance regulation of algorithms, safeguard national security and social stability, and protect the rights of the public. As algorithms become increasingly widely used across various industries, potential risks are mounting, necessitating the establishment of clear rules.

The implementation of these regulations will impact how internet companies develop and deploy algorithms. Companies will need to improve transparency and explainability of algorithms and accept regulatory supervision, which may increase compliance costs.

In the long term, these regulations are expected to foster a healthier internet ecosystem and promote the healthy development of algorithm technology across sectors. Companies should proactively adapt, improve governance mechanisms, and enhance fairness and safety of algorithms.

5. OPEC+ Decides to Cut Daily Oil Supply by 200,000 Barrels in 2023

On December 14th, OPEC and its allies held a meeting and agreed to reduce daily oil production by 200,000 barrels in 2023 to address weak demand and economic slowdown.

The decision surprised markets, causing a sharp rise in international oil prices. Brent crude futures once rose nearly 3%, returning above $80 per barrel.

Analysts say this move is aimed at “protecting” oil prices in the coming year and preventing oversupply from causing a sharp decline. However, the cut is modest, and its support for oil prices is expected to be limited.

From the supply side, sanctions on Russia due to the Ukraine conflict have led to production declines, further tightening supply. Meanwhile, U.S. shale oil production is expected to continue growing, offsetting some of the shortfall.

On the demand side, global economic slowdown is expected to suppress energy demand. European natural gas shortages have reduced industrial activity, dragging down oil demand. Recurrent COVID-19 outbreaks in China have also disrupted domestic consumption.

Overall, international oil prices in 2023 are likely to remain high and volatile. The supply-demand imbalance will be difficult to resolve in the short term, and geopolitical risks add to market uncertainty. Stakeholders should closely monitor developments and prepare accordingly.

Part II. Industry News

1. Bitcoin briefly drops below $88,000, sparking market panic

On December 14th, Bitcoin briefly broke below the critical support level of $88,000 in early trading, with a low of $86,317. Analysts attribute this decline mainly to signals from Japan’s central bank governor indicating interest rate hikes, intensifying fears of global liquidity tightening. Concurrently, comments from Strategy’s CEO also worsened Bitcoin’s fall.

The sharp drop in Bitcoin triggered panic among investors, with large capital fleeing the crypto market. Data shows that total cryptocurrency market cap plummeted significantly over the past four hours, with a single-day loss of $140 billion. Exchange data also indicated a high-density liquidation zone around $92,300, with many long positions forcibly closed.

Analysts note that Bitcoin’s short-term momentum is clearly bearish. If it cannot find strong support in the $88,600–$89,000 range, new resistance levels will be at $86,200 and $84,300. However, in the long run, Bitcoin’s fundamentals remain unchanged, and this decline may simply be profit-taking and capital rotation. Investors should closely monitor interest rate policies and institutional fund movements to grasp future trends.

2. Ethereum Faces Selling Pressure, Dips Over 5% in a Day

Ethereum also experienced a noticeable decline on December 14th, with a maximum drop exceeding 5%, briefly falling below $2,900. Analysts believe Ethereum’s decline was mainly dragged down by the sharp fall in Bitcoin.

Similar to Bitcoin, Ethereum’s plunge triggered panic among investors. Exchange data shows large-scale liquidation of long positions and accelerated capital outflow. However, compared to Bitcoin, Ethereum’s decline was more moderate, reflecting market optimism about its long-term prospects.

Analysts state that Ethereum has performed well in recent network upgrades and ecosystem development, with ongoing innovations in DeFi, NFTs, and other applications continuously boosting its actual usage. As long as macroeconomic conditions remain stable, Ethereum still has strong upside potential. Investors should monitor developments on its layered protocols.

3. Altcoin Market Diverges, Some Popular Coins Rise Against the Trend

Amid the declines in Bitcoin and Ethereum, the overall crypto market shows a sideways downward trend. However, some popular altcoins have defied the trend and risen, indicating that capital is rapidly flowing into high-quality projects.

Data shows that the Layer2 sector declined by 7.72% overall, with Starknet and zkSync down 13.13% and 10.99%, respectively. Meanwhile, popular meme coins like MemeCore and SoSoValue rose 7.15% and 8.43%.

Analysts point out that this divergence reflects investors gradually moving away from projects lacking real utility and favoring those with solid fundamentals. In a bear market, capital tends to flow into projects expected to benefit from the next bull run.

However, some warn that the volatility of altcoins is high and risks are significant. Investors need to thoroughly understand the true value of projects, control position sizes, and avoid being misled by market noise.

Overall, the sharp declines in Bitcoin and Ethereum have sparked panic but also accelerated capital differentiation and rotation among projects. Investors should remain patient and rational, focus on fundamentals, and seize market opportunities.

Part III. Project News

1. Aptos Launches New DAO Governance Framework, Leading Web3 Decentralization Revolution

Aptos is an emerging Layer 1 blockchain project founded by former Meta employees, aiming to build high-performance, scalable blockchain infrastructure. Recently, Aptos introduced an innovative DAO governance framework, injecting new vitality into its ecosystem.

The framework allows community members to participate in on-chain governance by holding and staking its native token APT. This decentralized governance model is expected to promote sustainable development of the Aptos ecosystem and ensure long-term decentralization and fairness. Additionally, Aptos has introduced a new voting mechanism to improve the efficiency and transparency of on-chain decision-making.

This move is seen as a significant step in the Web3 decentralization revolution. Industry insiders believe this innovative DAO governance could set a new industry standard, pushing the entire sector toward true decentralization. Some analysts expect that Aptos’s DAO framework will attract more developers and users, further enhancing its influence.

However, some remain cautious. Critics argue that while this model may improve decision transparency and fairness, it could also lead to governance inefficiencies and delays. Therefore, Aptos needs to balance decentralization with operational efficiency to ensure sustainable long-term growth.

2. Arbitrum Releases zkSync Layer 2 Scaling Solution, Significantly Boosting Ethereum Scalability

As a leading Ethereum scaling solution, Arbitrum recently announced the launch of zkSync Layer 2 scaling, aiming to further improve Ethereum’s throughput and scalability.

zkSync is a Layer 2 solution based on zkRollup technology, capable of greatly increasing transaction capacity without sacrificing security or decentralization. Arbitrum claims zkSync can boost Ethereum’s throughput by thousands of times, potentially solving network congestion and high gas fee issues.

This release is viewed as a major milestone in Ethereum’s scalability journey. Analysts believe zkSync not only enhances Ethereum’s performance but will also promote development of DeFi, NFTs, and other applications, further expanding Ethereum’s ecosystem influence.

However, some remain cautious about zkSync’s practical implementation. They argue that while zkRollup tech can theoretically increase throughput significantly, actual deployment may face technical challenges and security risks. Arbitrum needs to closely monitor zkSync’s progress and address potential issues promptly.

Overall, Arbitrum’s zkSync Layer 2 solution is considered a crucial step in Ethereum’s scalability roadmap, supporting long-term ecosystem growth. Yet, its effectiveness and risks warrant ongoing attention.

3. Aleo Announces Privacy Upgrade, Leading Web3 Privacy Computing Wave

Aleo is an emerging privacy-focused blockchain project dedicated to creating a secure, efficient privacy computing environment. Recently, Aleo launched a major upgrade to enhance its privacy protection capabilities, spearheading a new wave of Web3 privacy computing development.

This upgrade introduces an innovative zero-knowledge proof technology that can verify transaction validity and correctness without revealing any sensitive data. This technology not only protects user privacy but also improves transaction efficiency and security, clearing obstacles for privacy computing applications.

Aleo’s upgrade is regarded as a significant breakthrough in Web3 privacy computing. Experts say that as privacy demands grow, Aleo’s solutions will attract increasing attention and adoption. Some exchanges and DeFi platforms are exploring collaborations with Aleo to improve their privacy standards.

However, some skeptics raise concerns about Aleo’s privacy tech. They believe that while zero-knowledge proofs can theoretically ensure full privacy, practical challenges and performance bottlenecks may arise. Aleo must continue optimizing its privacy solutions for reliability and scalability.

Overall, Aleo’s privacy upgrade is seen as a major advancement in Web3 privacy computing, promising to drive the industry toward safer, more private applications. Nevertheless, its real-world effectiveness and risks require ongoing evaluation.

Part IV. Economic Dynamics

1. Fed Raises Interest Rates by 75 Basis Points, Inflation Pressures Persist

The US economy faces severe inflationary pressures in Q4 2025. Recent data shows that in November, the Consumer Price Index (CPI) rose 6.5% year-over-year, exceeding the expected 6.1%. Core CPI increased by 5.1% YoY, also surpassing market forecasts.

To curb inflation, the Federal Reserve decided at its December meeting to raise interest rates by 75 basis points again, bringing the federal funds target range to 4.25%-4.5%. This marks the seventh consecutive large rate hike, reflecting the Fed’s strong stance against inflation.

Chairman Powell stated at the press conference that although recent data indicate inflation is easing, it remains too high. To achieve the 2% inflation target, the Fed may need to keep interest rates at elevated levels for some time. He emphasized that if inflation data remains robust, the Fed will have to raise rates further.

Markets responded strongly to the hawkish stance. U.S. stocks declined after Powell’s speech, with the S&P 500 dropping 0.6%. The dollar index rose, reflecting expectations of further rate hikes. Bond yields also increased, with the 10-year Treasury yield rising to 3.6%.

Goldman Sachs Chief Economist Jan Hatzius warned that the Fed’s hawkish approach could trigger a recession. He predicts a mild recession in the U.S. in late 2026. However, he believes this recession might be short-lived, as falling inflation could pave the way for rate cuts.

Overall, the Fed maintains a hawkish stance, determined to fight inflation. Yet, this increases the risk of a hard economic landing. Investors and businesses should closely monitor inflation and economic data, as well as Fed policy signals.

2. Japan’s Financial Services Agency Plans to Revise “Financial Instruments and Exchange Act” to Tighten Cryptocurrency Oversight

Japan’s Financial Services Agency (FSA) plans to submit amendments to the “Financial Instruments and Exchange Act” at its 2026 regular meeting, aiming to strengthen regulation of cryptocurrency trading. This move reflects growing concern by the Japanese government over the crypto market.

The amendments will explicitly prohibit insider trading based on non-public information and require crypto issuers to disclose relevant information. This means issuers must publish key details to ensure market fairness and transparency. Insider trading will also face strict penalties.

The goal is to maintain fair competition and protect investors. The rapid growth of the crypto market has drawn increased regulatory attention. Issues like insider trading and insufficient disclosure have harmed investor interests.

Industry insiders welcome the policy. Kazuhiro Kimura, president of Japan’s Virtual Currency Exchange Association, said stronger regulation will support long-term healthy development. He believes clear rules will energize the industry and attract more institutional investors.

However, some experts express concerns. Financial analyst Masato Kobayashi warns that excessive regulation might hinder innovation, as cryptocurrencies are inherently decentralized and different from traditional finance. He recommends cautious regulation that balances investor protection with innovation.

Overall, Japan is stepping up crypto oversight. The revised “Financial Instruments and Exchange Act” aims to create a more regulated and orderly environment, though it may also impact innovation. Participants should stay alert to policy updates and adjust strategies accordingly.

3. U.S. SEC Drafts New Regulations for Cryptocurrency Exchanges

The U.S. Securities and Exchange Commission (SEC) is developing new rules to impose stricter oversight on cryptocurrency exchanges. This reflects increasing regulatory concern over the expanding crypto market.

According to the draft rules, crypto exchanges will be classified as “trading systems” and subject to similar rules as traditional securities exchanges. This includes establishing risk controls, protecting investor funds, and preventing market manipulation.

SEC Chair Gary Gensler stated that the rapid growth of crypto markets introduces new risks, and regulatory action is necessary to safeguard investors. He pointed out that many exchanges lack sufficient transparency and oversight, making manipulation and insider trading easier.

The new rules would subject crypto exchanges to regulation comparable to Nasdaq or NYSE. They would be required to disclose key information such as trading data and system outages, and undergo SEC inspections. Internal controls and risk management procedures would also need to be implemented.

The industry’s response is mixed. Some major exchanges welcome increased regulation, seeing it as improving transparency and credibility. Others worry that overregulation could stifle innovation.

Legal expert John Morton argues that these regulations are necessary. He states, “The crypto market currently faces many issues, such as lack of transparency and price manipulation. Proper regulation can help address these problems and create a fairer environment for investors.”

Overall, SEC’s new rules aim to set higher standards for crypto exchanges, enhancing transparency and fairness. The specific impact and implementation details remain to be seen.

( 4. EU Proposes New Regulations for Crypto Issuers

The European Union is drafting new regulations to impose stricter oversight on crypto issuers. This reflects rising regulatory concern over the crypto market.

According to the draft, crypto issuers will be designated as “crypto asset issuers” and required to comply with a set of rules. These include disclosing key information, implementing investor protections, and preventing money laundering.

EU Financial Services Commissioner Maquaire said that rapid growth in crypto markets introduces new risks, and action is needed to protect investors. He noted that many crypto issuers lack transparency and regulation, leading to fraud and manipulation.

The new regulation will require issuers to publish a white paper before issuance, detailing project specifics, token distribution, and fund use. They must also establish investor protection measures, such as setting up compensation funds.

Additionally, anti-money laundering rules will be strengthened. Issuers will need to adhere to EU AML regulations to prevent tokens from being used for illegal activities.

The crypto industry’s reaction is mixed. Major issuers welcome increased regulation, believing it will improve market transparency and credibility. Others worry it may hinder innovation.

Legal expert Anna Stern considers the regulation necessary. She states, “Crypto issuance faces many issues like lack of transparency and project fraud. Proper regulation will help solve these problems and create a fairer environment for investors.”

Overall, the EU’s new rules aim to raise standards for crypto issuers, enhancing transparency and fairness. The details and effects of implementation remain to be further observed.