By Omkar Godbole (All times ET unless otherwise noted)
Last week we described bitcoin above $100,000 as a coiled spring ready to release energy in both directions. Unfortunately for the bulls, this energy is being released to the downside as market sentiment shifts in response to concerns over the impact of low-cost Chinese AI startup DeepSeek on the US AI sector and US tech leadership.
Bitcoin plummeted to $97,800 in Asian hours, as whales drove prices lower to liquidate overmatched buyers on perpetual futures exchanges. GPU-heavy AI tokens were sold at up to 40%, with similar pressure affecting GameFi assets.
Nasdaq futures tanked 700 points, and shares of chipmaker Nvidia ( NVDA ) were 10% lower in premarket trading. DeepSeek-R1 is expected to significantly reduce the cost of developing large language models, raising a question about the validity of the rich valuations of AI-related companies like Nvidia.
Trader and analyst Alex Kruger noted on the X: “The problem is that few understand how DeepSeek changes things. it’s hard to quantify the problem – and when faced with uncertainty, people take risks. When this happens in conditions of low liquidity, flush market hard.”
Kruger chooses not to buy the dip, saying he prefers to short positions above $100,000 as he expects increased volatility from the upcoming Fed meeting and potential policy maneuvers by President Donald Trump. The Fed is expected to reiterate its wait-and-see approach and maintain its hawkish December guidance on interest rates.
Still, all is not lost. Paul Howard, Senior Director at Wincent, said institutional participation could increase in the coming months.
“The next wave up is likely to come from organic participation from institutions in the next 3-4 months. I would be surprised to see a sharp return to pre-Q2 all-time highs,” he said in an email.
Howard identified recently launched layer-1 blockchains focusing on security and transactions per second, like SUPRA, as valuable opportunities, while stressing that for long-term funds, discovering alpha in a bearish market involves looking for low-market cap tier-1s alongside their already established peers. Pay attention!
What to see
- Crypto:
- January 27 (provisional): Abstract, an Ethereum L2, has its mainnet launch, which is expected to expand the reach of the Pudgy Penguins project beyond NFTs.
- January 28 at 13:00: Hedera (HBAR) network upgrade to v0.57.5.
- January 29: Cardano’s Plomin hardfork network upgrade.
- January 29: Ice Open Network (ION) mainnet launch.
- 2 February at 20:00: Core blockchain Athena hard fork network upgrade (v1.0.14)
- February 4: MicroStrategy Inc. (MSTR) earnings report for Q4 2024.
- February 4: Pepecoin (PEPE) halving. At block 400,000 the reward will drop to 31,250 PEPE.
- 5 February at 15:00: Boba Network’s Holocene hardfork network upgrade to its Ethereum-based L2 mainnet.
- February 6 at 8:00am: Shentu Chain network upgrade (v2.14.0).
- February 12: Hut 8 Corp. earnings report. (HUT) Q4 2024.
- February 15: Qtum (QTUM) hard fork network upgrade is scheduled to take place at block 4,590,000.
- February 18 (after market close): Semler Scientific (SMLR) reports Q4 2024 earnings.
- February 20: Coinbase Global (COIN) Q4 2024 Earnings Report.
- Macro
Token Events
- Governance votes and calls
- Compound DAO votes on whether to implement yield curve adjustments for Stablecoin Comets across multiple networks, including Ethereum and Base.
- The Clover Finance DAO votes on whether to rename the CLV network to the Lucent Network to align with a hub to build a decentralized finance and artificial intelligence (DeFAI) platform. The realignment will include a migration from Polkadot to an SVM chain and a new token ticker, LUX.
- The Arbitrum DAO is voting on a proposal to establish the Arbitrum Strategic Objective Setting (SOS), which will allow DAO members to propose and vote on short- to medium-term goals.
- Unlocks
- January 31: Optimism (OP) to unlock 2.32% of circulating supply worth $52.9 million.
- January 31: Jupiter (JUP) unlocks 41.5% of circulating supply, worth $626 million.
- February 1: Sui (SUI) unlocked approximately 2.13% of its circulating supply, worth $226 million.
- Token lists
- January 28: Pudgy Penguins (PENGU) and Magic Eden (ME) to be listed on Kraken.
- January 29: Cronos (CRO), Movement (MOVE) and Usual (USUAL) to list on Kraken.
Conferences:
Token Talk
By Shaurya Malwa
- AI-themed agents and memes took a roaring Monday, with stalwarts Virtuals Protocol ( VIRTUALS ), ai16z ( AI16Z ) and eliza ( ELIZA ) falling as much as 30% as China’s DeepSeek led to a repeat of US AI start- assessments.
- The decline saw massive Sunday rallies on Jupiter’s JUP and Base memecoin toshi (TOSHI).
- JUP surged 40% when founder ‘Meow’ announced at an annual conference that the platform would burn over $3 billion JUP tokens and begin using 50% of its fees to buy back tokens from the market.
- TOSHI more than doubled when Coinbase listed perpetual futures for the token, making it the only Base memecoin with both a spot and futures listing on the influential exchange.
- The subsequent surge in demand sent the token to a peak market cap of $820 million.
Derivative positioning
- BTC perpetual funding rates turned negative during European hours, showing a net bias for shorts. Historically, such positioning has tended to mark local price bottoms.
- BNB, DOGE, TRX and AVAX also experienced negative fund rates.
- BTC, ETH short options now show a bias for put options that offer downside protection. Post-February expirations continue to show a call bias.
- Today’s key block trades include a short volatility play involving short positions in BTC $05K call and $98K put, both expiring on January 10th. In ETH’s case, shorts in out-of-the-money calls and a long position in the $3K put have been noted.
Market movements:
- BTC is down 5.95% as of 16 ET Friday at $98,784.45 (24 hours: -5.84%)
- ETH is down 6.12% to $3,050.20 (24h: -7.88%)
- CoinDesk 20 is down 9.07% to 3,536.28 (24 hours: -9.66%)
- The CESR Composite Staking Rate is down 2bps to 3.1%
- BTC funding rate is at 0.0006% (0.7% annualized) on Binance
- DXY is down 0.26% to 107.17
- Gold is down 0.21% at $2,767.13/oz
- Silver is down 0.55% at $30.48/oz
- The Nikkei 225 closed -0.92% at 39,565.80
- The Hang Seng closed +0.66% at 20,197.77
- The FTSE is down 0.21% at 8,483.97
- The Euro Stoxx 50 has fallen 1.51% to 5,140.89
- The DJIA closed Friday -0.32% at 44,424.25
- The S&P 500 closed -0.29% at 6,118.71
- The Nasdaq closed -0.5% at 19,954.30
- The S&P/TSX Composite Index closed +0.14% at 25,468.49
- The S&P 40 Latin America closed +0.53% at 2,322.63
- US 10-year Treasury fell 13 bps to 4.5%
- E-mini S&P 500 futures are down 2.37% at 5,988.00
- E-mini Nasdaq-100 futures are down 4.27% at 20,974.75
- E-mini Dow Jones Industrial Average Index futures are unchanged at 44,216.00
Bitcoin statistics:
- BTC Dominance: 59.45 (0.60%)
- Ethereum to bitcoin ratio: 0.0392 (-1.7%)
- Hashrate (seven-day moving average): 766 EH/s
- Hash price (spot): $60.2
- Total Fees: 4.19 BTC/$439,954
- CME Futures open interest: 187,465 BTC
- BTC priced in gold: 35.8 oz
- BTC vs Gold Market Cap: 10.17%
Technical Analysis
- The RSI on the hourly chart fell to 20 during Asian hours, the lowest since late August.
- In other words, bearish momentum was the strongest in nearly five months.
- RSI readings below 30 are taken to represent oversold conditions and a sign of an impending bearish rally.
Crypto stocks
- MicroStrategy (MSTR): closed Friday at $353.67 (-5.11%), down 4.9% to $336.35 in the premarket.
- Coinbase Global (COIN): closed at $298.00 (+0.67%), down 4.9% to $283.39 in premarket.
- Galaxy Digital Holdings (GLXY): closed at C$32.52 (-4.18%)
- MARA Holdings (MARA): closed at $19.99 (+0.2%), down 6.1% to $18.77 in the premarket.
- Riot Platforms (RIOT): closed at $13.54 (+4.23%), down 6.94% to $12.60 premarket.
- Core Scientific (CORZ): closed at $15.98 (-2.2%), down 15.33% to $13.53 in the premarket.
- CleanSpark (CLSK): closed at $11.53 (+1.05%), down 6.76% to $10.75 premarket.
- CoinShares Valkyrie Bitcoin Miners ETF (WGMI): closed at $26.22 (+2.22%), down 8.28% to $25.05 in the premarket.
- Semler Scientific (SMLR): closed at $55.46 (-9.3%), down 9.48% to $50.20 in the premarket.
- Exodus Movement (EXOD): closed at $61.25 (+39.2%), down 2.04% to $60 in the premarket.
ETF Flows
Spot BTC ETFs:
- Daily net flow: $517.7 million
- Cumulative net flows: $39.94 billion
- Total BTC holdings ~ 1.173M
Spot ETH ETFs
- Daily net flow: $9.18 million
- Cumulative net flows: $2.8 billion
- Total ETH holdings ~ 3.67 million
Source: Farside Investors
Overnight flows
Today’s chart
- Like BTC and Nasdaq, gold has remained relatively stable, possibly on the back of safe-haven demand.
- The Haven appeal appears to have driven the yield on the 10-year Treasury note down nine basis points to 4.504%. Bond prices and interest rates move in opposite directions.
While you were sleeping
- Bitcoin Dips Below $99,000 as DeepSeek, FOMC Steal Trump Effect (CoinDesk): Bitcoin fell below $99,000 as traders prepared for this week’s FOMC meeting and Chinese startup DeepSeek’s advanced AI model pressured US tech ratings, weighing market sentiment and crypto prices.
- Solana, Dogecoin, XRP fall 10% as bloody start to week sees $770M long liquidations (CoinDesk): SOL and DOGE led declines as crypto markets saw $770M in bullish liquidations, and the total market capitalization fell 8.5%.
- Bitcoin May Be ‘Double Topping’ for Price Drop to $75K (CoinDesk): Bitcoin’s Inability to Sustain Gains Above $100,000 Signals Weakening Momentum. If the price falls below $91,300, it could potentially reach as low as $75,000, analysts said.
- China’s economy stumbles in sign rebound hinges on more stimulus (Bloomberg): China PMI data for January showed manufacturing contracts and services easing, signaling a faltering recovery amid weak demand and trade pressures. Analysts warned of further slowdown without stronger fiscal stimulus.
- Fixed-income investors look for ways to navigate a Trump presidency (Financial Times): Sticky consumer inflation, a strong U.S. jobs market and uncertainty about Trump’s policies have led to a selloff in Treasuries, although some investors see current prices as attractive long-term gains.
- Emerging Markets Investors Eye Frontier Assets Protected From Trump’s Tariff Threats (Reuters): Amid Trump’s tariff threats and global tensions, some investors are turning to frontier markets such as Serbia, Ghana and Sri Lanka for growth potential and insulation from US trade risks.
