The first week of January 2026 will see significant cryptocurrency news, including major protocol upgrades, regulatory changes, and token events that will change the market.
If traders respond to major cryptocurrency news this week in advance, they can strategically allocate their portfolios.
Bank of America recommends Bitcoin allocation
Amid the movement of cryptocurrency adoption by institutions, Bank of America now allows asset management advisors to recommend a 1% to 4% portfolio allocation to cryptocurrencies.
This policy will take effect from January 5, 2026, allowing advisors at Merrill, Private Bank, and Merrill Edge to propose regulated Bitcoin ETFs such as BITB, FBTC, Grayscale Mini Trust, and IBIT.
This decision aligns with broader trends. Morgan Stanley, BlackRock, Fidelity, Vanguard, SoFi, Schwab, and JP Morgan have also recently expanded their cryptocurrency offerings. Behind this trend are regulatory changes and strong customer demand for digital assets.
Meanwhile, Bitcoin has fallen 30% from its all-time high of $126,199, but it has risen more than 5% compared to the beginning of the year.
Public acceptance has expanded with the approval of Bank of America, but most of the current spot Bitcoin ETF assets are held by individual investors who have recently incurred losses. At the same time, institutional holdings have risen from 20% to 28%, indicating a clear trend of assets moving from individuals to professionals.
Overall, the cryptocurrency market has lost $600 billion in Bitcoin market capitalization since October. The small-cap index has reached its lowest level since November 2020, and recent altcoin ETFs have turned negative in a short period.
Speculations on the Federal Reserve Chair replacement... impact on coin policy
Amidst market uncertainty, President Trump is expected to announce the nominee for the Chair of the Federal Reserve around January 9, 2026. Kevin Hassett is a strong candidate who could replace Chair Powell, and the market expects that his selection would lead to a shift in monetary policy towards easing.
National Economic Council Chair Hassett supports rapid interest rate cuts and growth-oriented policies. His appointment could increase liquidity and trigger a dollar weakness that may raise the prices of Bitcoin, Ethereum, and other altcoins. Funding for DeFi and Layer 2 is also expected to become easier, increasing risk appetite.
Some are concerned about the impact on the independence of the Federal Reserve. Changes could shake the bond market, and there are suggestions that capital may flow towards digital assets. The timing of the announcement could coincide with other significant cryptocurrency events, leading to high volatility.
Ethereum Layer 2 infrastructure expansion
Ethereum will implement a major upgrade on January 7, 2026. The network will increase the blob capacity per block to lower Layer 2 roll-up transaction fees. According to the Ethereum Foundation, BPO-1 has been applied, increasing the capacity per block to 15 blobs, while BPO-2 will be released in January for further expansion.
This upgrade directly benefits major Layer 2s like Arbitrum, Optimism, and Base. Data capacity is expanded without a hard fork, maintaining network security while significantly reducing user costs.
This upgrade provides practical scalability and cost reduction in an uncontroversial manner.
This upgrade coincides with intensified competition with alternative Layer 1 blockchains. As DeFi, NFTs, and tokenized assets increase, efficiency becomes even more important. Maintaining decentralization while enhancing scalability remains the core value of Ethereum's Layer 2 strategy.
Stellar, Protocol 25 privacy testnet launch
Stellar enhances privacy features through Protocol 25 (X-Ray). The testnet voting is scheduled for January 7, 2026, while the mainnet voting is scheduled for January 22. This upgrade natively supports the popular zero-knowledge (zk) elliptic curve BN254 and the Poseidon hash function.
These features enable on-chain zk-SNARK verification on Stellar's smart contract platform Soroban. Developers can build privacy apps similar to Ethereum's EIP-196/197, making it easier for projects using zero-knowledge technology to transition from Ethereum and EVM-compatible chains.
With support for Poseidon and Poseidon2 hash functions, privacy feature contracts become more efficient. Transparency and compliance are maintained, and robust privacy tools are added, allowing developers to access proven cryptographic techniques without losing auditability.
Stellar is strategically positioning itself in a market where the importance of privacy is increasing. As regulations change, blockchains that provide both transparency and selective anonymity may appear more attractive to institutions and clients focused on compliance.
Token unlock... protocol milestone
Hyperliquid is set to face a significant event on January 6, 2026. On this day, $30 million worth of HYPE tokens will be unlocked for early contributors. Such unlocks often increase selling pressure. The market's reaction will reflect investor sentiment towards this decentralized perpetual contract exchange.
On the other hand, zkSync Era will end its service on January 7, 2026. The end of Ethereum Layer 2 indicates a rapid improvement in scalability. The latest version offers better performance and security.
Gnosis is scheduled to unveil its Vision 3.0 and roadmap at the January 7, 2026 AMA. This decentralized infrastructure provider has been expanding tools for DAOs and prediction markets. This announcement is expected to lead to new partnerships or product launches.
Other events include Huma Finance announcing a major announcement on January 5. Additionally, Folks Finance offers staking at an annual 30% APR until January 5.
Thus, various events create a market where opportunities and risks are intertwined. Increased institutional participation, protocol upgrades, and a changing market environment will test whether the cryptocurrency market can withstand volatility in the coming week.