Jerome Powell On Crypto, DeepSeek Saga & Gold All-Time High

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This Week’s Top Stories

“Jerome Powell: Banks Can Serve Crypto Clients as Long as They Can Manage the Risk. And the Fed Is Not Against Innovation.” – Wednesday, 29 January 2025

• While the Federal Reserve announced that the target range for the federal funds rate will remain unchanged at 4.25 – 4.50 percent, which was in line with expectations, an adjustment in the FOMC minutes briefly spooked the market. However, Jerome Powell was able to calm the uncertainty during his press conference following the release.
• The crypto community was of course more focused on his remarks about digital assets. He stated that the Fed is not against innovation when asked about crypto. He also mentioned that he believes it would be helpful to have a more robust regulatory framework for crypto, as this would provide greater certainty for large banks to step into the space.

“The DeepSeek Saga – What Happened This Week?” – Monday, 20 January – Friday, 31 January 2025

• DeepSeek R1 Launch: Interestingly, DeepSeek launched its R1 advanced reasoning model on Monday, 20 January 2025, and claimed it rivaled OpenAI’s o1 product on several benchmarks, despite being created with far less funding.
• No. 1 Spot on the Appstore: On Saturday, 25 January, the DeepSeek mobile app took over the number one spot in the App Store in the U.S., U.K., China, Canada, and other countries around the world. This is when the story really gained traction, and uncertainty began to rise regarding the potential implications for the U.S. stock market, specifically in the AI sector.
• “AI’s Sputnik Moment”: Prominent investors began to speak about DeepSeek. Marc Andreessen tweeted that DeepSeek’s R1 model is AI’s Sputnik moment. These comments spooked the markets when the U.S. futures market opened on Sunday evening CET. The Bitcoin and crypto markets also traded to the downside, with BTC down over 7 percent overnight until Monday morning.
• A bloody Monday On Wallstreet: The DeepSeek news really hit the market at the open on Monday. Nvidia lost more than 12 percent at the market open, alongside other big chip stock companies such as Broadcom and Taiwan Semiconductor Manufacturing Company.
• The Worst Daily Percentage Loss Since March 2020: Monday marked the Nvidia's worst daily percentage loss since March 2020, losing more than $589 billion in market capitalization on a single day – the biggest one-day loss in U.S. history.
• Rebound Tuesday: On Tuesday, Nvidia and the U.S. stock market rebounded, with Nvidia posting the second-best day ever for any stock in terms of market value added in a single day.
• Did DeepSeek Use OpenAI’s Models For Training? On Wednesday, White House AI Czar David Sacks told Fox News that there was substantial evidence suggesting DeepSeek had used OpenAI’s models to train its own, which would be a breach of OpenAI’s terms of service.
• The Saga Continues: Nvidia traded to the downside again on Wednesday but recovered some of its losses on Thursday. It is currently down 12 percent since Friday and flat for the week. The story continues…

“Favorable Capital Gains Signaled For U.S. Crypto by Eric Trump.” – Monday, 27 January 2025

• On Monday various sources communicated that Eric Trump allegedly confirmed U.S.-based crypto projects would be exempt from capital gains tax. The 30 percent capital gains tax would apparently be imposed on non-U.S.-based projects.
• With this tax advantage, U.S.-based cryptocurrency projects could secure a competitive edge over offshore counterparts, potentially accelerating customer acquisition and boosting adoption.
• The most mentioned and largest U.S.-based projects include, among many others, XRP, SOL, AVAX, LINK and SUI.

A Quick Crypto Overview: Consolidation Below December’s High

When looking at the total market capitalization, the chart shows a period of consolidation below December’s high, and the total market cap is currently fighting at the $3.51 trillion level, which was where it was rejected at the beginning of January, as the chart below shows.

We mentioned last week that the crypto market would likely follow traditional financial markets over the next few weeks and become more dependent on macro developments again—at least until there are new major crypto-specific developments, particularly in the U.S. surrounding Trump and his new administration. Looking back on this week, this has played out so far.

The next FOMC meeting is scheduled for March, so a period is now approaching where crypto could benefit from sector-specific news. However, we will keep a close eye on U.S. economic data releases, including the unemployment rate, initial jobless claims, and nonfarm payrolls, all of which will be published next week.

Chart of the Week: Gold Has Quietly Hit A New All-Time High

Bitcoin’s big brother, gold, has quietly hit a new all-time high this week, trading above $2,850 for the first time in history. Gold futures are now up almost 12 percent from their November lows and have gained 7.5 percent since the beginning of the year alone.

We have highlighted gold quite a few times in the Weekly Wrap over the past year and will continue to keep a close eye on it – especially as Bitcoin’s narrative as "digital gold" continues to gain traction in the world of traditional finance.

What’s Happening On-Chain? Jupiter Acquisition, Virtuals Expansion & Memecoins

Jupiter, the Solana DEX, has announced the acquisition of a majority stake in the crypto trading platform Moonshot. Moonshot is a mobile application where users can buy memecoins with credit cards or Apple Pay. The app is available in the App Store and Google Play in more than 130 countries and has risen in popularity over the past year. The price of JUP, the token of the Jupiter DEX, increased by more than 50 percent following the announcement on Saturday.

The Virtuals Protocol, the AI token issuance tool, has announced its expansion to Solana. It was originally available only on the Base chain but has now expanded to a second network, allowing them to grow and bring their vision to life. They also announced the Virtuals AI Hackathon, which will take place in March and aims to bring together builders in the AI agent space.

In other news, memecoins are having a rough time… You surely remember dogwifhat, right? It recently reached a new multi-month low, dropping below the magic $1 mark, but has since recovered some ground and is now trading above that psychological level at the time of writing. But WIF isn’t the only one struggling – most memecoins are down over the past few weeks, with some having given up most of their gains, now down more than 80 percent from their highs.

Murad, the person behind the “memecoin supercycle” movement, who presented the now legendary keynote speech at the Token2049 in Singapore last summer, has recently shared an updated version of his list. The list highlights some of the outperformers in the meme category but clearly shows that the meme sector is currently bleeding. The question is: do you believe in the memecoin supercycle?

Digital Asset Fund Flows: The U.S. Is Playing In Its Own League

Digital asset investment products once again saw a strong performance last week, with a total of $1.9 billion in net inflows. Bitcoin saw the most inflows, with a total of $1.76 billion flowing into BTC products. Ethereum products saw inflows of $205 million, while XRP came in third with $18.5 million.

It’s important to mention that last Monday was a holiday in the U.S., yet the U.S. still led all regions by a huge margin, with $1.75 billion in net inflows over just four trading days—a remarkable performance and a strong reminder that the U.S. remains unmatched in terms of flows, as the table below clearly shows.

On Monday, MicroStrategy officially launched its previously announced convertible preferred stock offering for institutional and select retail investors. Named STRK, the company will issue 2.5 million shares of its Series Perpetual Strike Preferred Stock, each with a $100 liquidation preference. The stock will accumulate cumulative dividends at a fixed rate, which will be determined at the time of pricing the offering. If declared by MicroStrategy’s board, regular dividends will be paid quarterly.

MicroStrategy intends to use the net proceeds from the offering for general corporate purposes, including acquiring bitcoin.

Market Sentiment: Extreme Greed For Crypto & Mixed Feelings For Stocks

The OG crypto fear and greed index is showing extreme greed levels at 76, while other sentiment indices such as the Coinmarketcap fear and greed index are showing neutral levels of 54. Both indices have a rather good historical performance in sensing overly optimistic sentiment during times of overextended price action. The OG index, for example, was only above the 90 level twice – once in mid-March and once at the end of November.

The visualization of the CMC Fear and Greed Index is quite useful, as it shows the Bitcoin price, volume, and sentiment in one chart. It is also interesting to note the difference between the two indices in their sentiment analysis right now.

Other Relevant News

• Elon Musk's DOGE is considering blockchain adoption in government efficiency push. – Link
• BlackRock filed to allow in-kind creation and redemption on their Bitcoin ETF. – Link
• MicroStrategy has acquired 10’107 BTC for ~$1.1 billion at ~$105’596 per Bitcoin. – Link
• Kucoin pleads guilty to U.S. charges of unlicensed money transmitting business. – Link
• French investigators have opened judicial probe into money laundering, tax fraud, drug trafficking, other charges against Binance. – Link
• Czech central bank chief proposes allocating up to 5% of reserves to Bitcoin. – Link
• Czech central bank approves proposal to assess investing reserves in Bitcoin. – Link
• Trump Media launches fintech brand Truth.Fi, plans to invest $250M into SMAs, ETFs and crypto. – Link
• SEC approves Bitwise combined Spot Bitcoin and Ethereum ETF. – Link

Looking Ahead: Acceptance Above $100’000?

With the FOMC meeting and interest rate decision behind us, the tone is set for the coming weeks, and since the Fed did not really shake up the market, there is no apparent reason to assume something will drastically change over the coming weeks. We will keep a close eye on economic data releases, as they can indicate how the Fed will move forward in its March meeting.

When it comes to crypto, it is certainly good to see that Fed Chair Powell had positive comments on crypto during the press conference on Wednesday, and the news from the Czech central bank could also spark a new wave of rumors or news surrounding the strategic Bitcoin reserve topic.

It’s interesting to observe how Bitcoin currently seems to be in the process of finding acceptance above the magic $100’000 level, and we will certainly keep an eye on this next week. The S&P 500 is on track to close the week in the green, and gold is trading at new all-time highs. The U.S. Dollar Index, however, has gained back some of its losses from the past two weeks, likely attributed to Trump’s comments on incoming tariffs for Canada and Mexico last night.

For all altcoin holders, it is an interesting time to watch Bitcoin dominance, as it was rejected from December’s high this week but is still on track to close the week in the green. The question remains when and if altcoins will gain some traction again against BTC.

Below, you can find some of the key data releases and events to watch out for next week.

Monday, 3 February 2025

• Eurozone – CPI, Core CPI

Tuesday, 4 February 2025

• U.S. – JOLTS Job Openings

Wednesday, 5 February 2025

• Eurozone – PPI

Thursday, 6 February 2025

• Switzerland – Unemployment Rate
• U.S. – Initial Jobless Claims

Friday, 7 February 2025

• U.S. – Nonfarm Payrolls, Unemployment Rate

Saturday, 8 February 2025

• China – CPI, PPI