Bitfinex Alpha #192 | BTC Stabilises as Early Signs of Optimism Emerge

16 February 2026

BTC STABILISES AS EARLY SIGNS OF OPTIMISM EMERGE

MARKET SIGNALS

Bitcoin Attempts Recovery Amidst Favourable Macro Backdrop

MACRO UPDATE

US In ation Cools In January But Underlying Pressures Persist

ISSUE # 192

EXECUTIVE SUMMARY Bitcoin is attempting to stabilise after the 5 February capitulation event, which drove the price to a local low of $60,100. The macro backdrop has turned constructive. Headline CPI cooled to below expectations, reinforcing the narrative that disinflation is gaining traction. Treasury yields declined, the dollar softened, and rate markets repriced toward three potential cuts in 2026, with April increasingly favoured for the first move. For non-yielding assets such as Bitcoin, this shift in real yield expectations reduces macro headwinds.

Derivatives positioning supports the view that the recent bounce is a stabilisation phase rather than a leverage-driven squeeze. Funding rates have normalised, implied volatility has compressed below 50, and downside skew has moderated from deeply defensive levels to a more balanced 5 delta range. This repricing suggests that traders are no longer aggressively hedging tail risk, but neither are they aggressively re-leveraging.

On-chain data further reinforces the constructive undertone. Approximately 18,400 BTC were withdrawn from exchanges over the past week, continuing the medium-term decline in exchange balances. Long-term holder supply has begun rising again after a multi-month distribution phase, increasing to 14.3 million BTC following a December trough.

Historically, expansions in long-term holder supply have acted as a multi-month leading indicator for price recovery, signalling that stronger hands are re-accumulating into weakness.

ETF flows remain the primary soft spot. Flows briefly turned positive ahead of the CPI announcement, but did not sustain that shift. Institutional demand has not yet reasserted itself in size, and sustained ETF absorption will be required to decisively reclaim higher on-chain resistance levels. Structurally, Bitcoin remains confined between two major valuation anchors. Overhead, the True Market Mean near $78,200 now acts as resistance following repeated failures to reclaim it.

Below, the Realised Price near $55,000 defines the deeper value boundary of the cycle. Until price resolves beyond this band, the market is likely to oscillate within a broad consolidation range, with absorption at the lows and distribution near cost-basis resistance.

US macro data at the start of 2026 point to gradual stabilisation rather than renewed acceleration. The Consumer Price Index showed inflation easing to 2.4 percent year-on-year in January, down from 2.7 percent in December, with monthly prices rising 0.2 percent. The moderation was largely driven by lower energy and gasoline costs, while core inflation, which excludes food and energy, rose 0.3 percent on the month and 2.5 percent annually. However, services inflation remains firm at 3.2 percent year-on-year, and tariffs continue to place upward pressure on certain goods, suggesting underlying price pressures have not fully dissipated.

The labour market presents a similar picture of resilience with moderation. January nonfarm payrolls increased by 130,000 and the unemployment rate edged down to 4.3 percent. However, annual benchmark revisions reduced prior job estimates by 898,000, confirming that 2025 hiring was weaker than previously reported. Wage growth remains steady at 3.7 percent year-on-year, but retail sales were flat in December and the control group slipped 0.1 percent, indicating softer consumer demand. Together, the data support a “slow-hire, slow-fireˮ environment, reducing the urgency for very near-term rate cuts while keeping the Federal Reserve in a patient stance.

Alongside these macro dynamics, the Federal Reserve has shifted from shrinking its balance sheet to expanding it modestly. Funding market indicators, including the spread between the Secured Overnight Financing Rate and the Interest on Reserve Balances IORB, signalled tightening reserves, prompting renewed Treasury purchases to stabilise liquidity. This expansion is operational rather than stimulative, but expanding reserves tend to support financial conditions, cushion risk assets and apply gradual structural pressure on the US dollar.

In the crypto sector, institutional positioning remains selective. Goldman Sachs reduced its exposure to spot Bitcoin and Ether exchange-traded funds ETFs in the fourth quarter of 2025, trimming holdings by 39.4 percent and 27.2 percent respectively, amid a broader market pullback. However, it added positions in newly launched XRP and Solana ETFs, suggesting continued engagement rather than exit.

Regulatory developments are also accelerating globally. Hong Kongʼs Securities and Futures Commission expanded its framework to allow licensed platforms to offer crypto perpetual contracts to professional investors and clarified rules on margin financing and market-making, while preparing to implement a stablecoin licensing regime in March 2026. In the US, two senators have urged the Treasury to assess whether a $500 million UAE-linked investment in World Liberty Financial warrants a national security review under the Committee on Foreign Investment in the United States. The firm issues the USD1 stablecoin and is seeking a national trust bank charter, placing it at the intersection of digital assets, banking regulation and geopolitical scrutiny.

INDEX 1. Market Signals ●

Bitcoin Attempts Recovery Amidst Favourable Macro Backdrop

2. General Macro Update

714 814

1524

●

US Inflation Cools in January but Underlying Pressures Persist

1617

●

US Labour Market Stabilises While Consumer Spending Softens

1820

●

Structural Liquidity Returns: Understanding the Fedʼs Approach to Its Balance Sheet

2124

3. News From the Cryptosphere

2529

●

Goldman Sachs Cuts Bitcoin and Ether ETF Exposure as Market Softens in Q4

26

●

Hong Kong Expands Crypto Regulatory Framework to Boost Trading and Professional Products

2728

●

US Senators Seek National Security Review Of UAE Stake In World Liberty Financial

29

Bitcoin Attempts Recovery Amidst Favourable Macro Backdrop Following the sharp fall in BTC on February 5th, which saw BTC establish a local low at USD 60,100, the asset has had a volatile week. The price rebounded approximately 20 percent before retracing lower again, correcting seven percent from the weekly open, before rising once more and stabilising, following favourable US macroeconomic data releases.

Figure 1 BTC/USD Hourly Chart. Source: Bitfinex) This is only the second occurrence since the week starting October 20th that price has corrected significantly (more than five percent), only to recover again, and move above the weekly open. While this is not a signal for sustained upside, it shows strength in the market, and could carry the price higher to significant upside targets like the True Market Mean and the Monthly Open, both confluent around the $78,500 level. It is also notable that last week also recorded the first green weekly close after three successive red weeks for BTC. The latest Consumer Price Index CPI) print indicated moderating inflationary pressures, while labour market data suggested gradual softening rather than renewed acceleration. As a result, market-implied probabilities shifted to reflect a 50 percent chance of three potential rate cuts in 2026, with the first adjustment increasingly priced for either the April or June Federal Open Market Committee FOMC) meeting. This repricing in forward policy expectations provided a constructive backdrop for risk assets.

For several months, digital asset markets had been constrained by persistent inflation concerns, restrictive central bank rhetoric and the after-effects of January and early Februaryʼs pronounced drawdown. The CPI release marked the first substantive evidence of disinflation gaining traction, prompting a reassessment of the Federal Reserveʼs policy trajectory. Improved liquidity expectations, combined with stabilising On Chain metrics, supported a measured recovery across the complex.

BTCʼs rebound following the CPI print was reinforced by derivatives positioning.

Funding rates normalised, implied volatility compressed and downside hedging demand moderated, suggesting a recalibration of short-term risk premia rather than an aggressive re-leveraging phase. This shift indicates that participants are positioning for reduced realised volatility while maintaining directional exposure.

Headline CPI rose 2.4 percent year-over-year, down from 2.9 percent in December and below consensus expectations. While still above the Federal Reserveʼs two percent target, the deceleration reinforced evidence that prior tightening is filtering through the economy and that upside inflation risk is moderating.

Figure 2 Bitcoin Aggregated Implied Volatility. Source: Deribit) Bitcoinʼs implied volatility moved under 50 for the first time since the monthly open. This move was brought about by the downward trend climaxing on Feb 5th and BTC simultaneously holding the lows while posting an impressive recovery last week confluent with bullish news.

Figure 3 Bitcoin Implied Volatility Curves Across All Available Expiries All February expiries at the $72,000 strike are now trading below 50 vol. Implied volatility reflects the magnitude of price movement the market expects over a given horizon. Adjustments of this scale rarely represent transient dislocations; they typically signal a broader repricing of forward risk across the volatility surface.

Although implied volatility has retraced from recent extremes, it remains elevated across maturities. This indicates that participants continue to price sustained uncertainty rather than a rapid normalisation in realised volatility.

The term structure remains steep. Front-month implied volatility is comparatively elevated, while three- and six-month tenors are more anchored. This configuration suggests that event risk is still being priced in the near term, albeit at lower intensity than previously observed. At the same time, aggregate positioning does not indicate that options markets are assigning high probability to an extended bearish regime.

In this environment, professional participants may structure trades that monetise the slope of the curve, such as selling longer-dated volatility to finance shorter-dated hedges. This approach allows for positive carry generation while retaining protection against near-term adverse moves.

The cross-asset response was also immediate. US Treasury yields declined, with the ten-year yield falling from around 4 percent to approximately 3.82 percent.

The US dollar index DXY) eased to 101.5. Precious metals stabilised following Januaryʼs sharp positioning unwind, though volatility remained elevated. For digital assets, the shift in macro conditions was constructive.

Lower real yields reduce the relative carry disadvantage of non-yielding assets such as Bitcoin, while a softer dollar supports global liquidity conditions. In parallel, the risk that further tightening would constrain liquidity across stablecoin issuers and crypto credit channels diminished materially.

BTC responded accordingly, with the broader digital asset complex benefiting from the improved macro impulse.

Figure 4 Bitcoin Option Skew Delta 25 Across Multiple Expiries. Source: The Block) An interesting metric confluent with on-chain patterns is the 25-delta skew, which is a measure of risk reversal, moved from strongly negative (put‑heavy) to a more balanced average of 5.5. This indicates that traders had shifted from buying downside protection to selling volatility or positioning for further upside.

Year-to-date, sell-side pressure has largely been absorbed within the same range that defined much of the first half of 2024, between $60,00072,000. Repeated defence of this zone suggests emerging buyer conviction, particularly as ETF flow data reflects diminishing net outflows relative to Januaryʼs distribution phase.

Figure 5 Bitcoin Cost Basis Distribution Heatmap. Source: Glassnode)

On-Chain metrics reinforce this constructive spot backdrop. Exchange balances continued their medium-term decline, with approximately 18,400 BTC withdrawn from centralised venues over the past week. Sustained net outflows of this magnitude typically indicate reduced immediate sell liquidity and a preference for self-custody or longer holding periods.

If absorption across the range persists, the structure could resemble prior accumulation phases that preceded impulsive expansions. Durable range support, combined with declining exchange supply, would strengthen the case for a constructive medium-term base.

Bitcoin ETF Investing Has Stalled BTC ETFs have seen net selling since October 2025, with cumulative flows since launch in January 2024 peaking in late October at 62,700 BTC and sits currently at 54,311 BTC, with some sporadic inflows. This overall trend of consistent outflows across all providers shows decreasing appetite for crypto exposure from the ETF cohort.

Figure 6 Bitcoin Spot ETF Cumulative Flows. Source: FarsideUK

After heavy redemptions in late January, where combined outflows topped $2.7 billion over two weeks and contributed to the sell‑off, flows stabilised and turned positive before CPI week. However, last week overall, flows are still negative. A point to be noted is that the BlackRock IBIT fund, which is by far the largest ETF issuer has a one day delay in flows reporting, so while we suspect that they have large inflows on Friday, evident from spot market flows, we will not receive the numbers until later this week.

How are Long-Term Holders Positioned?

Long-term holder LTH) supply is finally moving higher, signalling early signs of accumulation.

Previously this metric continued to fall as both whales and long-term holders which are often overlapping cohorts of investors - distributed their holdings by 13.5% between July-December 2025. Currently the metric has moved upwards to 14.3 million BTC, after bottoming in mid December.

Figure 7 Bitcoin Price Against Long-Term Holder Supply. Source: Bitcoin Magazine Pro) Typically, LTH supply is a leading metric to price, as accumulation starts during the latter end of downtrends. In recent history, this metric reaching new highs has proved to be a 34 month leading indicator in relation to price.

If LTH accumulation continues to increase at the current pace, we might see a repeat of June 2023 or September 2024-like price action once our current range resolves towards the upside.

From a macro range standpoint, as we have previously highlighted, BTC is increasingly confined between two major on-chain metrics at range extremes that also have other confluences from technical levels such as the monthly open as resistance.

On the upside, the True Market Mean $78.2k) has flipped into overhead resistance following repeated failures to reclaim it on both daily and weekly timeframes. This level previously acted as a demand anchor during consolidation phases, but after the breakdown, it now represents a zone where prior support may transition into supply.

On the downside, the Realised Price $55k continues to define the deeper value boundary of the current cycle. Historically, this metric, which reflects the aggregate cost basis of the network, has served as the level where long-term capital meaningfully re-engages during extended corrective phases. Moves toward the Realised Price typically coincide with late-stage deleveraging, capitulation among weaker cohorts, and the gradual re-accumulation by stronger hands.

Figure 8 Risk Indicator- Realized Price/True Market Mean/Active Investor Mean/STHRealized Price As long as price remains trapped between these two structural anchors, the market is likely to oscillate within a wide but definable valuation band, with upside attempts capped near cost-basis resistance and deeper downside attracting longer-horizon buyers.

US Inflation Cools in January but Underlying Pressures Persist

Figure 9 One-Month Percent Change in Consumer Price Index Source: Bureau of Labor Statistics) US inflation seems to have eased at the start of the year, but the slowdown may not fully reflect underlying price pressures. While lower energy and gasoline costs helped moderate headline figures, structural factors such as tariffs and data distortions complicate the outlook for monetary policy.

The Consumer Price Index CPI released last Friday, February 13, showed that inflation rose 2.4 percent in January from a year earlier, down from 2.7 percent in December. On a monthly basis, prices increased 0.2 percent. Core inflation, which excludes food and energy to provide a clearer view of underlying trends, rose 0.3 percent in the month and 2.5 percent over the year.

The moderation in headline inflation was largely driven by energy prices, which fell 1.5 percent in January, including a 3.3 percent decline in energy commodities and a 3.2 percent drop in gasoline prices. Gasoline was down about 3 percent on the month and 7.5 percent from a year ago. Used car and truck prices also declined 1.8 percent, contributing to softer transportation costs.

However, not all categories improved. Services prices increased 0.4 percent in January and were up 3.2 percent year-on-year. Services account for roughly 64 percent of the CPI basket, meaning movements in this category carry significant weight. Food and beverages increased 0.2 percent in January and 2.8 percent from a year earlier. Electricity and home heating costs remained elevated despite broader energy weakness.

Headline inflation remains above the Federal Reserveʼs two percent target, and we do not expect the latest CPI reading to materially accelerate rate cuts, given continued solid economic growth and a stabilising labour market reduces the urgency to ease monetary policy.

Tariffs also continue to influence price dynamics. Import duties imposed by the Trump administration have raised the effective US tariff rate to an estimated 16.9 percent, the highest since 1932, according to the Yale University Budget Lab. Tariffs act as taxes on imported goods, and businesses often pass some of these costs on to consumers. Immigration policy has also contributed to higher service costs by limiting labour supply in certain sectors.

There is also an important methodological caveat. During the government shutdown from 1 October to 12 November 2025, federal statisticians were unable to collect full pricing data. In several categories, the BLS assumed no price changes occurred during that period. This statistical distortion may overstate the apparent improvement in price stability.

Januaryʼs inflation report offers cautious optimism but not a decisive turning point. Lower fuel and used-vehicle prices eased headline inflation pressures, yet service costs and tariff-sensitive goods continue to rise. For policymakers, the data supports taking a patient stance towards easing monetary policy. For households, the path back to sustained price stability remains gradual rather than immediate.

US Labour Market Stabilises While Consumer Spending Softens The US labour market has shown signs of stabilisation at the start of 2026, even as past job figures were revised sharply lower. At the same time, consumer spending has slowed, suggesting that economic growth is becoming less reliant on hiring and more dependent on productivity and fiscal flows.

Figure 10 Unemployment Rate, Nonfarm Payroll Employment Source: Bureau of Labor Statistics) In its January Employment Situation Report, the Bureau of Labor Statistics BLS reported that nonfarm payrolls increased by 130,000 in January, while the unemployment rate declined to 4.3 percent. However, the BLS also issued its annual benchmark revision, reducing previously reported job totals between April 2024 and March 2025 by 898,000 on a seasonally adjusted basis. A benchmark revision is a routine update that aligns survey-based estimates with more complete administrative records. This adjustment provides a clearer picture of underlying labour conditions.

After accounting for these revisions, hiring appears to have stabilised in recent months. Job creation averaged 15,000 per month over the prior year, reflecting a low-growth environment rather than contraction. Over the past three months, hiring has been moderately improving, supported by earlier rate cuts.

Policymakers often view monthly job growth in the range of zero to 50,000 as consistent with a stable labour market, given slower population growth and tighter immigration policies.

Sector data however showed divergence. Health care and social assistance led gains, adding a combined 124,000 positions in January. Construction employment rose by 33,000, partly linked to investment in artificial intelligence data centres. In contrast, federal government employment declined by 34,000, while financial activities shed 22,000 positions. Manufacturing posted a small monthly gain but remains below prior-year levels following trade-related uncertainty.

Wage growth remained firm. Average hourly earnings increased 0.4 percent in January and 3.7 percent on an annual basis. Higher wages, alongside a 528,000 rise in household employment, contributed to a modest increase in labour force participation.

Figure 11 CME FedWatch Tool - Meeting Probabilities Importantly, the data does not suggest recessionary conditions. Instead, they point to a “slow-hire, slow-fireˮ environment, meaning businesses are cautious about expanding payrolls but are not engaging in widespread layoffs. The CME FedWatch Tool indicates that investors expect the Fed to maintain current policy in the near term, with some probability of a rate adjustment mid-year. Investors see 50 percent probability of three rate cuts this year and that has reflected in prices drifting higher as further discussed in the Market Signals section.

While employment shows resilience, consumer demand has weakened. The Commerce Department reported that headline retail sales were unchanged in December, below expectations for a 0.4 percent increase. The control group, which feeds directly into gross domestic product GDP) calculations, declined by 0.1 percent.

Figure 12 Retail Sales Source: US Census Bureau) Retail sales volatility reflects shifting spending patterns. Tariffs and a temporary government shutdown disrupted consumption in late 2025, leading to earlier purchases in the summer and softer activity toward year-end. Consumer confidence has also been affected by slower job growth and ongoing affordability pressures. While tax refunds worth approximately $100 billion are expected to support demand in the coming months, the timing and distribution of that impact remain uncertain. Some households may also prioritise debt repayment or savings rather than immediate consumption.

Taken together, the data suggests a divergence between GDP and employment.

GDP measures total production in the economy, including investment and output, but it does not always reflect household financial conditions. Hiring has slowed due to demographic changes, tighter immigration rules, productivity improvements and the end of pandemic-era labour hoarding. As artificial intelligence investment accelerates, production may continue to expand without a proportional increase in payrolls.

For monetary policymakers, this environment presents a nuanced challenge.

Employment is stable enough to avoid immediate rate cuts, yet the softness in consumer spending warrants vigilance. The January data reinforces a base case for gradual stabilisation rather than renewed acceleration, an outcome that supports a patient policy stance as structural economic changes continue to unfold.

Structural Liquidity Returns: Understanding the Fedʼs Approach to Its Balance Sheet

Figure 13 Federal Reserve Total Assets Source:Fred Charts) The Federal Reserve has moved from reducing its balance sheet to expanding it again. This shift is not an emergency response, but an operational adjustment designed to maintain stability in a financial system that is large and complex.

Figure 14. Secured Overnight Financing Rate, SOFR, Minus the Interest Rate on Reserve Balances, IORB Source: Macromicro)

In recent months, funding markets indicated that banking system reserves were becoming tight. When reserves fall too low, short-term borrowing costs can drift above the Fedʼs target range. As shown in Figure 14 above, the spread between Secured Overnight Financing Rate SOFR) and the Interest on Reserve Balances IORB) moved persistently into positive territory, signalling that secured overnight funding was trading above the rate the Fed pays on reserves. This shift typically indicates that liquidity buffers are thinning and reserves are becoming less abundant. To prevent further pressure, the Federal Reserve resumed regular purchases of US Treasury securities. The objective is simple: ensure that banks hold enough reserves to settle payments smoothly and to keep short-term interest rates anchored.

At its core, this expansion is a maintenance function. As the economy grows, as government debt increases and as bank deposits expand, the pool of reserves must also grow. Without that adjustment, the system periodically runs into friction.

The mechanics are straightforward. The Fed credits banks with newly created reserves and, in exchange, purchases Treasury securities. The Fedʼs balance sheet expands on both sides: its assets increase through additional Treasury securities, and its liabilities increase through higher reserve balances. For banks, reserves are highly liquid. A larger reserve base gives them greater flexibility to manage lending and funding without strain.

This differs from traditional quantitative easing. In earlier cycles, the Fed purchased long-term bonds with the explicit aim of stimulating economic activity after cutting policy rates to near zero. The current approach focuses on preserving orderly market functioning rather than aggressively pushing growth higher. Yet in both cases, the result is an increase in base liquidity.

Even gradual balance sheet growth influences asset behaviour. When liquidity is expanding rather than contracting, financial conditions tend to remain accommodative. Stable funding markets reduce the risk of abrupt credit tightening, which helps sustain valuations in equities and other risk-sensitive assets. While this does not eliminate volatility, it lowers the probability of systemic stress events.

What Does This Mean for Financial Assets?

Figure 15 US Dollar Index Source: TradingView) A steadily expanding balance sheet can also modestly weigh on the US dollar over time. When the supply of base money increases persistently, particularly alongside large fiscal deficits, the currency faces structural pressure. The US Dollar Index has already shown softer dynamics, declining roughly 11 percent over 2025 and continuing to weaken into early 2026, trading around 96.9 as of mid-February 2026 after hitting multi-year lows near 95.5. This is not necessarily immediate or dramatic, but over longer periods, higher liquidity often corresponds with softer currency dynamics.

Bitcoin and hard assets such as gold typically respond to these liquidity conditions in cycles. When investors anticipate expanding reserves and ongoing fiscal deficits, capital often rotates toward scarce assets. However, because this is not an aggressive stimulus phase, the moves tend to unfold in waves rather than in a single surge. Liquidity builds gradually, positioning increases, corrections occur, and the broader trend resumes.

Importantly, this environment does not resemble a conventional tightening cycle.

In past tightening phases, the Fed reduced its balance sheet, drained reserves and allowed financial conditions to tighten meaningfully. Today, although policy rates remain positive, the balance sheet is no longer shrinking. Instead, it is growing in line with the scale of the financial system. That distinction changes the market backdrop.

The broader implication is that balance sheet expansion has become embedded in the structure of the modern economy. As nominal GDP, deposits and Treasury issuance continue to rise, reserve growth must follow to prevent repeated liquidity strains. The current trajectory does not represent an extraordinary surge in money creation relative to the size of the system. It represents continuity.

For investors, the message is nuanced. Liquidity is not contracting. Risk assets therefore retain an underlying cushion. The dollar may face gradual headwinds.

Scarce assets can benefit during phases when liquidity expectations strengthen.

The regime is neither a crisis stimulus nor a strict restraint; it is structural maintenance in a highly indebted world.

Goldman Sachs Cuts Bitcoin and Ether ETF Exposure as Market Softens in Q4

Goldman Sachs reduced its exposure to spot Bitcoin and Ether exchange-traded funds ETFs in the fourth quarter of 2025, according to its latest filing with the US Securities and Exchange Commission SEC. The adjustment came during a period of broad weakness across the digital asset market.

In its Form 13F submitted to the SEC, the investment bank reported that, as of 31 December, 2025, it held approximately 21.2 million shares across multiple spot Bitcoin ETFs, valued at $1.06 billion. This represented a 39.4 percent decline in share count compared with the third quarter.

The firm also scaled back its exposure to spot Ether ETFs. Holdings stood at around 40.7 million shares at year-end, with a market value of roughly $1 billion.

That marked a 27.2 percent reduction from the previous quarter.

While trimming its Bitcoin and Ether positions, Goldman Sachs initiated new allocations to recently launched spot XRP and Solana ETFs. By the end of December, 2025, the bank reported holdings worth $152.2 million in spot XRP ETFs and $108.9 million in spot Solana ETFs. The portfolio changes occurred against the backdrop of a declining crypto market in the final quarter of the year. Bitcoin fell from approximately $114,000 at the end of September to about $87,000 by year-end. Ether also weakened over the same period, declining from $4,140 to $2,970.

The rebalancing suggests that institutional exposure remains active but selective.

Rather than withdrawing from the asset class entirely, Goldman Sachs appears to have reduced risk in larger positions while diversifying into newly approved products.

Hong Kong Expands Crypto Regulatory Framework to Boost Trading and Professional Products

Hong Kongʼs financial regulator, the Securities and Futures Commission SFC, has unveiled a set of expanded rules aimed at deepening the cityʼs regulated digital asset market and enhancing liquidity, particularly for professional investors, according to a press release issued last Wednesday, February 11.

Under the new high‑level framework, licensed virtual asset trading platforms will be permitted to offer crypto perpetual contracts, a type of derivative that allows traders to speculate on price movements without expiration dates, exclusively to professional clients. These platforms must also adopt stringent risk‑management measures, including leverage limits, margin requirements, and robust internal controls to protect market integrity and manage volatility risks. Separately, the SFC issued guidance allowing licensed intermediaries to provide margin financing for crypto asset trading using a broader range of collateral, explicitly including bitcoin and ether, provided appropriate suitability assessments and risk controls are in place.

In tandem with derivatives and margin development, the SFC clarified conditions for market‑making activities by affiliated entities on licensed platforms, aiming to improve liquidity while managing conflicts of interest through enhanced governance, surveillance, and disclosure obligations. The broader regulatory approach is part of Hong Kongʼs ongoing strategy to cultivate a deeper, more efficient and transparent virtual asset market, focusing on price discovery and investor confidence rather than unchecked expansion. SFC officials at the Consensus Hong Kong conference stressed that the city is prioritizing market quality, emphasising robust infrastructure, controlled access to advanced trading products, and responsible innovation to differentiate its regulatory model from other global hubs.

These changes occur amid a broader regulatory evolution in Hong Kong, which includes stablecoin licensing, expected to begin in March 2026, under a new framework, and prior efforts to license crypto exchanges, dealers, and custodians. The stablecoin regime, backed by legislation that took effect in 2025, is designed to bring fiat‑referenced digital currencies within a regulated perimeter with clear reserve and compliance standards. These regulatory developments signal Hong Kongʼs ambition to position itself as a leading, regulated digital finance hub in Asia, balancing innovation with investor protection and financial stability even as neighbouring jurisdictions, such as mainland China, maintain stricter crypto prohibitions.

US Senators Seek National Security Review Of UAE Stake In World Liberty Financial Two US senators: Elizabeth Warren and Andy Kim, have urged the Treasury Secretary Scott Bessent, to determine whether a $500 million investment by a UAE-linked entity into World Liberty Financial should face national security scrutiny. The request centres on whether the transaction warrants review by the Committee on Foreign Investment in the United States CFIUS, the Treasury-led body that assesses foreign investments for security risks.

CFIUS examines transactions that could provide foreign actors with access to sensitive technology, infrastructure, or large volumes of personal data. Lawmakers argue that World Liberty Financial, which collects customer information and operates in the digital asset sector, may fall within that scope.

The reported 49 percent stake was acquired by G42, a technology firm backed

by Sheikh Tahnoon bin Zayed Al Nahyan, the UAEʼs national security adviser. The investment was made shortly before President Donald Trumpʼs inauguration in January 2025. Public reporting indicates that part of the upfront payment was directed to entities linked to the Trump family and to affiliates of Steve Witkoff, a co-founder of World Liberty. President Trump has denied knowledge of the deal.

Concerns also stem from prior scrutiny of G42ʼs historical ties to Chinese technology firms. Although G42 has stated it divested from Chinese holdings in early 2024, lawmakers argue that any foreign government-linked stake in a US financial technology firm merits review.

World Liberty Financial issues the USD1 stablecoin, which has grown to more than $5 billion in circulation since March 2025, and is seeking a national trust bank charter from the Office of the Comptroller of the Currency. During a press conference on February 3, President Donald Trump denied knowledge of the $500 million investment.

The Treasury Department has not confirmed whether a CFIUS review is under way. The case highlights increasing scrutiny of foreign state-linked capital entering strategic areas of digital finance.