TLDR:

• ECB targets mid-2029 for digital euro issuance pending legislative approval with pilot launch in 2027. 
• Nearly 70% of European card transactions rely on non-European processors raising sovereignty concerns. 
• Digital euro will use encrypted codes ensuring ECB cannot identify individual payers or transaction recipients. 
• Waterfall mechanism and holding limits designed to prevent bank deposit outflows and maintain stability.
  

The European Central Bank continues development of the digital euro despite other central banks pausing similar projects.

Piero Cipollone, ECB Executive Board member, explained the currency’s purpose and timeline in a recent interview.

The digital euro aims to provide a pan-European payment solution while reducing reliance on non-European payment processors. Cipollone emphasized that legislation must be completed before any issuance occurs.

Timeline and Legislative Progress Move Forward

The digital euro project has reached critical legislative stages. Cipollone clarified the current status: “We have not yet issued a digital euro and we will not do so until we have the legislation in place.”

The European Commission issued its original proposal in June 2023. The Council of the European Union reached agreement in December 2025.

The European Parliament is expected to vote on its position in May 2026. Negotiations between institutions should conclude by year-end.

The ECB targets mid-2029 for potential issuance if legislation passes. “We are already working to be prepared to be able to issue the digital euro, if the legislation is in place, by mid-2029,” Cipollone stated.

A pilot program will begin in 2027 to test payment functionality. The infrastructure development timeline matches the legislative process duration.

The ECB is preparing internal systems simultaneously. This parallel approach ensures readiness when legal frameworks are established.

The legislative process involves multiple stakeholders. The European Parliament is currently reviewing amendments. The Council and Commission have aligned their positions. All parties must reach consensus before implementation proceeds.

Addressing Banking Concerns and Privacy Protections

Financial institutions have raised liquidity concerns about potential deposit outflows. The ECB designed safeguards to maintain banking stability. Cipollone explained: “The stability of banks is a major concern for the ECB, as our monetary policy transmits via banks.” The digital euro will not pay interest, removing incentives for large-scale transfers.

A waterfall mechanism will automatically draw funds from bank accounts during transactions. Users won’t need to prefund their digital euro wallets for online payments.

Offline payments require pre-loaded funds in the wallet. Holding limits will further restrict the maximum balance per user.

The specific holding limit remains under discussion. The ECB, European Commission, and Council will determine this jointly.

The process ensures no sudden changes can occur. “Even for relatively high holding limits, we don’t see any financial instability,” Cipollone noted.

Privacy protections form a core design principle. “We have built the whole project around privacy,” Cipollone stated. The ECB will only see encrypted codes, not personal identities.

“All the ECB will see is encrypted codes that represent the payer and the payee, but we will not be able to identify the individuals behind these codes,” he explained.

European payment systems currently rely heavily on non-European processors. “Almost 70% of card-initiated transactions are processed by non-European companies,” Cipollone revealed.

The digital euro addresses this dependency. Merchants, especially small businesses, face high costs from international card schemes. The ECB will not charge scheme fees, reducing transaction costs substantially.

TLDR:

• Copy-trading high-probability outcome traders and supposed insiders led to consistent losses 
• Two specialized traders focusing on MicroStrategy and geopolitics generated bulk of profits 
• Manual copy-trading proved unsustainable requiring automation for 24/7 market monitoring 
• Traders with fewer than 100 bets and 80-90% win rates in single niches proved most profitable

Copy-trading on Polymarket generated approximately $650,000 in profits for one crypto trader over seven months.

The trader, posting under the handle @crptAtlas, shared detailed insights into a strategy that focused on following specialized market participants rather than bots or supposed insiders.

The approach centered on identifying traders with deep knowledge in specific niches like corporate actions and geopolitical events. This method contrasts sharply with common copy-trading tactics that often result in losses.

Avoiding Common Pitfalls in Prediction Market Copy-Trading

Atlas detailed three critical mistakes that initially led to losses before the profitable strategy emerged. The first involved copying traders who purchased extremely high-probability outcomes at 99.5 cents.

These positions offered minimal edge and suffered from execution timing issues and slippage problems. Manual copying could not match the speed required for such narrow-margin trades.

The second mistake centered on chasing accounts claiming insider knowledge. Most insider screenshots circulating on crypto Twitter proved to be fabricated or exaggerated.

Atlas noted that real insiders “start from empty wallets” and “stay invisible” without attracting public attention. Every attempt to follow these supposed insider accounts resulted in zero advantage.

The third error was attempting to replicate high-frequency traders and scalpers. These accounts executed dozens of trades per minute across multiple markets.

Atlas explained that “by the time your trade executes, price already moved” and spreads disappeared. The structural design of these strategies made them impossible to copy effectively.

After these failures, Atlas asked a pivotal question: “If bots, insiders, and scalpers don’t work – who does?” The answer proved straightforward: “Normal traders with asymmetric knowledge in one narrow niche.”

The new filtering criteria included fewer than 100 total bets and win rates between 80-90 percent. Medium position sizes of $40,000-$50,000 per bet proved more reliable than million-dollar wagers.

Targeting Specialized Knowledge Over Market Noise

Two specific traders drove the bulk of the reported profits. The first specialized in MicroStrategy-related predictions with eight trades and a 100 percent win rate.

Each position tied to company announcements or Bitcoin purchases. Atlas attributed success to “deep understanding of MSTR behavior” and “pattern recognition around timing and disclosures.” This trader alone generated approximately $140,000 in profits.

The second trader focused exclusively on global politics and international relations. With 43 predictions and 42 wins, this account demonstrated consistent accuracy in geopolitical outcomes.

Atlas noted that one single trade produced roughly $211,000 in profit. The trader referenced a Foresight News interview where similar strategies were publicly discussed.

Atlas initially copied trades manually but found the approach unsustainable for 24/7 market monitoring. A Telegram-based automation tool handled execution while human judgment guided wallet selection and position sizing. Starting with small positions allowed pattern validation before scaling to $10,000-$30,000 per trade.

The trader emphasized that prediction markets represent structural inefficiencies not yet fully professionalized. Atlas stated that “prediction markets are not just crypto gambling” but rather unexploited opportunities. The trader believes Polymarket will expand in 2026 regardless of broader crypto market conditions.

Probabilistic betting on real-world outcomes offers opportunities distinct from traditional cryptocurrency trading dynamics.

As the Federal Reserve navigates a gradual path of monetary expansion, investors increasingly view crypto markets through a macro lens. In a view echoed by Lyn Alden, a respected economist and Bitcoin advocate, the current regime is likely to spur asset prices in a measured way—enough to lift high-quality assets while avoiding the explosive rallies some on-chain enthusiasts once forecast. Alden argues the Fed’s balance sheet will grow roughly in proportion to nominal GDP, a framework that, she contends, supports a cautious reallocation toward scarce, resilient assets and away from crowded speculative bets. In this environment, Bitcoin (CRYPTO: BTC) remains a focal point for traders weighing how policy will ripple through liquidity and risk appetite.

The strategist’s stance sits against a backdrop of political and regulatory uncertainty shaping the Fed’s next moves. Alden’s February 2026 investment strategy newsletter suggests a continued emphasis on “high-quality scarce assets,” coupled with a strategic rebalance away from euphoric sectors toward areas that are under-owned but structurally robust. The broader context includes the ongoing debate about who will lead the Fed next, with market participants parsing how a potential chairmanship—whether Kevin Warsh or another figure—might tilt policy toward hawkish or dovish tendencies. The macro narrative is essential for crypto traders because interest-rate trajectories and liquidity cycles are historically linked to crypto price dynamics.

Historically, market outcomes hinge on the direction of credit and money supply. When policymakers expand credit by increasing the money supply, many assets—crypto included—tend to benefit in the near term. Conversely, a contractionist stance manifested through higher rates can dampen risk assets and compress prices. This duality informs current expectations: central banks have signaled a cautious, data-dependent approach, but investors remain vigilant for any signs that the balance sheet will outpace or merely keep pace with monitored economic growth. In late 2025, Powell pointed to a nuanced policy path, describing inflation and employment risks as two sides of a balancing act, and underscoring that policy carries no risk-free shortcut.

“Interest rate policy can influence crypto prices,” an established principle that investors continuously test. The flow of credit and the liquidity environment shape risk sentiment, and crypto markets—while diverse—are not insulated from such macro moves. The relationship between liquidity provision and asset prices remains central to how traders structure portfolios in the months ahead. Earlier this year, crypto observers noted how shifts in policy expectations could reprice risk, particularly for assets that benefited from prior rounds of monetary stimulus. A related analysis outlined how lingering policy ambiguity—especially around rate paths and balance-sheet expansion—can sustain volatility in the space.

Market observers have been tracking forward guidance and rate-path probabilities with particular attention to the upcoming FOMC decision window. Early signals suggested that a March rate cut was no sure thing, with traders estimating a roughly 20% probability of a cut at the next meeting, down from a prior reading near 23%. This shift reflects a broader re-pricing of risk as investors weigh the possibility that the Fed may remain cautious about inflation momentum and labor-market dynamics. The CME FedWatch tool has become a barometer for these expectations, showing a move toward pricing in steadier policy rather than aggressive easing.

At the same time, the policy backdrop remains unsettled. Powell, who leads the Federal Reserve, has faced questions about the speed and scale of future rate adjustments. Following the December FOMC meeting, he acknowledged that inflation risks appeared skewed to the upside in the near term, even as employment remained robust. With Powell’s term set to expire and Warsh’s confirmation still awaited by the Senate, investors must factor in the possibility that the committee’s consensus could shift as new data arrives. In such an environment, crypto traders increasingly view Bitcoin not merely as a speculative asset but as a potential hedge or cycle-levered instrument whose performance is tied to macro liquidity dynamics and the policy stance around money creation.

In the broader conversation about how policy affects asset prices, several interconnected themes emerge. First, the pace of balance-sheet expansion remains a critical variable; if the Fed continues to grow the monetary base in step with nominal GDP, the implication could be a gradual upward drift in risk assets, including crypto. Second, the market’s sensitivity to the chair’s temperament and the committee’s tightening or easing cadence means that any signals about policy discipline, inflation expectations, or financial-stability concerns can translate into intensified price movements across digital assets. Finally, the crypto space continues to wrestle with regulatory clarity and institution-building, which amplifies the impact of macro shifts on liquidity and diversification choices for investors.

Key takeaways

• The Fed is anticipated to maintain a gradual expansion of its balance sheet, aiming to grow in proportion to nominal GDP, a framework that could support broad asset prices without triggering extreme liquidity surges.
• Lyn Alden cautions that investors should rebalance away from euphoric sectors toward high-quality scarce assets, signaling a selective, value-oriented strategy for crypto holders.
• Market pricing for a March rate cut sits around 20%, down from prior levels, reflecting uncertainty about how inflation and employment data will unfold in the near term.
• Policy uncertainty, including the potential shift in leadership at the Fed, adds a layer of risk to crypto liquidity and risk sentiment in 2026.
• Crypto-price respond to money-supply signals, making Bitcoin a barometer for macro liquidity and policy expectations in the current cycle.

Tickers mentioned: $BTC

Market context: The macro backdrop remains characterized by ongoing liquidity considerations, policy guidance, and the broader risk-on/risk-off dynamic that has been shaping crypto markets as investors reassess long-term growth prospects and the trajectory of central-bank balance sheets.

Sentiment: Neutral

Price impact: Neutral. The policy path is seen as supportive for risk assets in a gradual way, but expectations for aggressive liquidity expansion have cooled, keeping volatility in check but not eliminating it.

Why it matters

For investors, the evolving policy framework matters because it defines the liquidity environment in which crypto markets operate. If the Fed sustains a measured expansion of its balance sheet alongside steady GDP growth, high-quality assets—often those with scarce supply or strong fundamentals—could outperform in a backdrop of resilient demand. Bitcoin, as the most mature cryptocurrency with significant liquidity and institutional interest, often reacts to shifts in money supply and policy expectations. The current outlook suggests a world where disciplined, data-driven decisions—rather than rapid-fire stimulus—could guide asset price trajectories, with crypto portfolios needing to adapt to changing risk premia and macro signals.

Builders and developers in the crypto space may also take cues from this macro environment. A more predictable policy path could reduce some downside macro risk, enabling longer-term experimentation and product development in decentralized finance, layer-1 ecosystems, and institutional-grade custody and liquidity solutions. Yet, the absence of a clear, easing-driven bull case could maintain a careful stance among investors who prize resilience and yield stability over speculative exuberance. In this setting, projects with robust on-chain economics, real-world utility, and sustainable governance could attract more durable capital, while speculative plays may experience more episodic volatility as market probabilities shift.

From a regulatory and institutional perspective, the interplay between central-bank signaling and crypto-market liquidity remains a focal point. If policymakers continue to emphasize cautious growth and gradual easing, the path of least friction for crypto institutions could involve deeper integration with traditional financial rails, enhanced risk controls, and clearer frameworks for custody, settlement, and reporting. The story remains dynamic, with policy, macro data, and market sentiment converging to shape the next phase of crypto adoption and price discovery.

What to watch next

• March FOMC outcome and the probability of a rate move, as reflected by CME FedWatch.
• Any new signals from the Fed about the pace of balance-sheet expansion and its relationship to nominal GDP growth.
• Nominal GDP growth data and inflation readings that could influence the committee’s guidance.
• Status of Kevin Warsh’s confirmation as Fed Chair and how leadership could influence policy tilt.
• Bitcoin price action in response to macro liquidity shifts and any notable shifts in institutional participation.

Sources & verification

• Lyn Alden’s February 2026 investment strategy newsletter (link to the original newsletter).
• Federal Reserve policy commentary and remarks by Chair Jerome Powell, including December FOMC statements.
• Market expectations for rates compiled by CME Group’s FedWatch tool.
• Related analyses on the impact of fed interest rates on crypto holders and investor sentiment pieces.

Fed policy signals, Alden’s outlook, and Bitcoin posture

Bitcoin (CRYPTO: BTC) sits at an intersection of macro policy and crypto market dynamics. Alden’s framework—favoring high-quality scarce assets and a measured reallocation away from speculative corners—suggests a patient, risk-aware stance for crypto investors. The notion that the Fed will pursue balance-sheet growth in line with nominal GDP implies a lingering but controlled liquidity environment, one that can support gradual asset price appreciation without igniting runaway inflation fears. In this context, BTC may benefit more from a steady money-supply backdrop than from sudden, outsized stimulus, aligning with a broader market preference for resilience and fundamentals. Readers can monitor the evolving policy narrative through linked discussions on Bitcoin’s price movements and broader crypto-market responses to rate expectations.

Powell’s cautionary framing—emphasizing no risk-free path for policy—highlights the asymmetry in policy outcomes. As the Senate weighs Warsh’s nomination, investors must weigh the likelihood of a hawkish tilt against the potential for cooler inflation readings later in the year. This balance matters for crypto liquidity, as a more cautious stance could prompt a shift in risk appetite, favoring assets with clearer on-chain utility and governance structures over more speculative bets. Taken together, the macro backdrop underscores the need for disciplined positioning, selective exposure, and ongoing scrutiny of liquidity signals as crypto traders navigate a landscape defined by gradual monetary expansion rather than rapid-fire stimulus.

US-headquartered companies captured 55% of Q4 crypto VC capital.

Crypto and blockchain venture capital witnessed a sharp rebound in Q4 2025, driven predominantly by large late-stage deals. Galaxy Digital’s report, authored by Alex Thorn, Head of Firmwide Research, found that venture capitalists deployed $8.5 billion across 425 deals in the quarter – an 84% increase in capital invested and a 2.6% rise in deal count compared to Q3 2025.

This represents the strongest quarterly investment in the sector since Q2 2022, although deal counts remain well below 2021-2022 levels.

Crypto VC Surge in Q4

Thorn reported that later-stage companies captured 56% of total capital invested, while earlier-stage startups accounted for the remaining 44%, a proportion unchanged from the previous quarter.

Eleven deals in Q4 raised over $100 million each, which collectively represented $7.3 billion, or roughly 85% of the quarterly total. The largest raises included Revolut at $3 billion, Touareg Group at $1 billion, and Kraken at $800 million.

Other prominent transactions included Ripple and Tempo at $500 million each, Erebor at $350 million, MegaHoot at $300 million, Rain at $250 million, EXUGlobal and TradeAlgo at $120 million each, and RedotPay at $107 million. Across 2025, venture capitalists invested a total of $20 billion into crypto and blockchain startups through 1,660 deals, making it the largest annual investment since 2022 and more than double 2023’s total.

The Trading/Exchange/Investing/Lending category remained the largest recipient of venture capital as it drew over $5 billion, led by Revolut and Kraken, while sectors including stablecoins, AI, and blockchain infrastructure also attracted notable investment.

Pre-seed deal counts remained healthy at 23% of total deals, which means continued entrepreneurial activity, while later-stage deal share has steadily increased as the sector matured. During this quarter, median pre-money valuations climbed to $70 million, and the median deal size reached $4 million. Valuation data existed for just 10% of deals, biased toward bigger, later-stage companies.

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Global Crypto VC

Geographically, 55% of capital went to US-headquartered companies, followed by the United Kingdom at 33%, Singapore at 2%, and Hong Kong at 1.7%. A similar pattern was seen across deal counts as well, with 43% completed by US companies, 6% in the UK, and 4% in Hong Kong.

Fundraising for crypto-focused venture funds reached $1.98 billion across 11 funds in Q4, which contributed to $8.75 billion raised for the full year, the largest since 2022. Average fund size rose to $167 million, with a median of $46 million.