Good morning, and welcome to First Mover. Here's what's happening this morning:

Market Moves: Bitcoin stabilizes even after high U.S. inflation print triggers predictions that the Federal Reserve must get more aggressive in tamping down economic froth.
Featured story: This year's crypto-market softness has sapped demand decentralized options-trading protocols, seen as a decline in volumes and locked collateral.

And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Today's show will feature guests:

Sandeep Nailwal, co-founder, Polygon
David Morris, chief insights columnist, CoinDesk
Kareem Sadek, cryptoassets and blockchain services co-leader, KPMG Canada

Today's newsletter was edited by Shaurya Malwa and produced by Parikshit Mishra and Bradley Keoun.

Bitcoin recovered some of its drop, passing through $43,500, after Thursday's faster-than-estimated U.S. inflation print sparked declines in bonds, equities and the crypto market.

Major cryptocurrencies nevertheless remained lower Friday over 24 hours, with bitcoin down 2.8% and ether 4.5% at the time of publication.

U.S. inflation hit 7.5% in January, a 40-year high, with prices for goods and costs for services expected to pick up, and the expectation is that the Federal Reserve will have to step in to cool down the economy by tightening monetary conditions. Analysts from Goldman Sachs forecast up to seven rate hikes this year, and Deutsche Bank is predicting nine. Historically, bitcoin has thrived when interest rates were set close to zero, and U.S. stocks have taken a hit recently; the Nasdaq Composite index is down 9.3% in 2022.

Some crypto funds, such as Singapore’s QCP Capital, remain bullish on the crypto market for February, however.

“Crypto prices rallied even though Nasdaq traded lower towards the end of last week,” the firm said in a Telegram broadcast. “We don't think this means that crypto has necessarily decoupled from Nasdaq but this tells us there is tangible and targeted crypto demand right now.”

QCP said it's bullish for February as market expectations and reactions around Fed hikes subside and a “positive seasonality.”

The total capitalization of the crypto market sank by 2.8% to $2.08 trillion. Altcoins led the decline, which led to an increase in the bitcoin dominance index by 0.5% to 40.1%.

In the past 24 hours, payments token XRP and Polygon’s MATIC plunged 7.5% each after a rally earlier in the week, while Solana’s SOL and Polkadot’s DOT dropped nearly 6% each. Avalanche’s AVAX token was the best performer with a nominal 0.4% decline, while bitcoin and ether lost nearly 3% and 5% respectively.

Full Story: Bitcoin Regains $43.5K as Funds Predict Bullish Month for Crypto

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DeFi Options See Drop in TVL

By Shaurya Malwa

Options protocols built on Ethereum and other networks saw falling volumes and users since the start of 2022, according to data analytics tool Glassnode. The trend follows a fall in the broader crypto market, analysts said.

The total value locked (TVL) in options protocols saw an exodus of hundreds of millions of dollars since the start of 2022, according to research from Delphi Digital this week.

TVL on platforms like Hegic dropped to under $800 million from $1 billion at the start of January, while some like Opyn saw nominal drops followed by recovery.

Ether prices fell to under $2,200 at the start of January, losing 37% since November’s lifetime highs of over $4,800. Tokens of other layer 1, or base, blockchains fell similarly, with Solana’s SOL losing 59% and Polkadot’s DOT losing 63% since November highs, CoinGecko data shows.

Full Story: DeFi Options Protocols Suffered as Ether Fell to $2.1K

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

U.S. Inflation Accelerates to 40-Year High, FLOW Token Surges on Beijing 2022 Olympics Winter Games License

"First Mover" hosts speak to Matthieu Jobbé-Duval of Dapper Labs for insights into the possible factors contributing to the surge of FLOW tokens. Scott Melker, "The Wolf of All Streets" crypto trader, shares his crypto market analysis as the U.S. CPI number jumps to a new 40-year high. Brandon Buchanan, Meta4 Capital founder and managing partner, shares his views on Web 3.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.