January 28th, 2025
Market Overview:
Digital assets pulled back slightly after strong early trading, following a wider sell-off in US markets spurred by US tech concerns.
- Bitcoin once again traded across a broad range this week; performing strongly in early trading, before a wider market sell-off based on US stock concerns (including the largest single-day loss ever by a publicly-traded firm) led to a deep pullback
- However, Bitcoin subsequently rebounded strongly from a brief dip around $98,000 and was left virtually unchanged on the weekly candle
- Bitcoin peaked on Tuesday at $107,150, before dropping to a weekly low of $98,270 in the wake of the stock market and risk asset decline
- Standard Chartered analyst Geoffrey Kendrick noted Bitcoin’s increased correlation with the Nasdaq, warning of potential future drops; “The risk now is that if Nasdaq liquidation continues during the US session (and likely disappointing FOMC Wednesday), then we start to approach other key levels for BTC”
- Ether’s hit a high of $3,421 on Friday, before dropping to a low of $3,024 amidst the Monday market concern
- Overall industry market capitalisation dropped slightly to $3.5tn, after reaching an intraweek high of $3.65tn
- According to industry monitoring site DeFi Llama, total value locked in DeFi pulled back slightly to $119.4bn
Digital assets experienced a mixed week, trading strongly for the majority of the following Davos discussions and executive orders, before being affected by wider market sell-offs on Monday as US tech stocks suffered from competition in the artificial intelligence sector. ETFs performed well, banks continued ramping up interest in the asset class as custody restrictions were eased, and several major VCs made major strategic moves.
What happened: Digital assets feature prominently in Davos discussions
How is this significant?
- During the recent World Economic Forum in Davos, Switzerland, digital assets featured heavily in discussions from a variety of institutions and high-profile individuals
- In a remote address to the forum, new US president Donald Trump declared that changes to national energy policy would help make America “the world capital of artificial intelligence and crypto”
- The “Crypto at a Crossroads” session explored various predictions of future sector developments from several luminaries including Franklin Templeton CEO Jenny Johnson, Coinbase CEO Brian Armstrong, South African central bank governor Lesetja Kganyago, SkyBridge Capital CEO Anthony Scaramucci, and Business Insider executive editor Spriha Srivastava
- Responding to scepticism around the Strategic Bitcoin Reserve concept by Kganyago, Armstrong argued that "it was the best-performing asset over the last 10 years... so for a store of value, I think it's going to be important for governments to hold this over time"
- Former Trump press secretary Scaramucci acknowledged the positive potential of a second term in power for digital assets, stating “it was very, very clear that if he won the election, things were going to change in the industry”
- Johnson voiced that the new administration should give rise to more sensible regulation; “These [Howey Test] rules were created as a reaction to the depression and stock market crash in 1929. The purpose was consumer protection. [Today, regulators need to] acknowledge that the technology is advancing so quickly that they have to evolve regulation to meet the technology”
- Armstrong also touted the potential of blockchain to improve existing economic infrastructure; “This is a technology that’s going to update the financial system globally, and make it faster, cheaper, more efficient”
- In a CNBC interview at Davos, Morgan Stanley CEO Ted Pick said the bank would work with regulators on transacting with digital assets
- He told Andrew Ross Sorkin “For us, the equation is really around whether we, as a highly regulated financial institution, can act as transactors… We’ll be working with the Treasury and the other regulators to figure out how we can offer that in a safe way”
- Bank of America CEO Brian Moynihan echoed those sentiments, telling CNBC “If the rules come in and make it a real thing that you can actually do business with, you’ll find that the banking system will come in hard… We have hundreds of patents on blockchain already, we know how to enter the field”
What happened: ETF News
How is this significant?
- Digital asset ETFs posted strong inflows across the board, helped by perceived political support in the form of Donald Trump’s crypto executive order
- According to CoinShares data published on Monday, digital asset investment products saw $1.9bn inflows in the week ending Friday the 24th
- This was roughly in line with the previous week’s $2.2bn inflows, indicating continued industry positivity around the new Republican administration
- Ether grew its share of overall flows, adding $205m compared to Bitcoin’s $1.59bn
- Spot Bitcoin ETFs achieved seven consecutive trading days of (at least) nine-figure inflows, building further on a strong start to the year
- However, this streak was broken on Monday, as wider markets moved into risk-off mode after Chinese A.I. innovations led to major losses for top stock NVIDIA and the wider US tech sector
- Tuesday saw the largest total inflows over the last week, adding $803m across all funds
- Meanwhile, Thursday saw the smallest overall inflows, at $189m
- Weekly growth dominated by BlackRock’s market-leading IBIT fund, which experienced four consecutive days with inflows above $150m
- IBIT added $662m on Tuesday, followed by $344m, $155m, and $156m
- Friday saw the most other funds joining IBIT in the nine-figure net flows club, as Fidelity’s FBTC and ARK Invest’s ARKB added $187m and $169m respectively
- Bloomberg’s chief ETF analyst Eric Balchunas noted that 2025 has carried on last year’s momentum for the funds; “The spot bitcoin ETFs quietly on fire to start the year, with $4.2bn in flows which is 6% of all ETF flows. Now at +$40bn net since launch with AUM at $121bn and return of 127%. For context they just passed ESG ETFs in assets ($117bn) and have about same as gold spot”
- Spot Ether ETFs featured several strong trading days, adding $75m and $71m on Tuesday and Wednesday, before outflows on Thursday snapped a six-day inflow streak
- Inflows were dominated by BlackRock’s ETHA, which accrued $56m and $79m on Tuesday and Wednesday, making it one of only two funds to post eight-figure inflows (the other being Grayscale’s 0.15% fee mini-ETF, which added $12.5m on Tuesday)
- In other ETF news, BlackRock filed to allow in-kind redemption of its IBIT fund, meaning customers could directly withdraw their assets in Bitcoin, rather than forcing BlackRock to sell it off for cash first
- Additionally, CoinShares filed for Litecoin and XRP ETFs, whilst Grayscale filed for a Solana ETF, a “Bitcoin Adopters ETF”, and an Ethereum Premium Income ETF
- Tuttle Capital filed for ten different leveraged crypto ETFs, including more exotic altcoins not yet covered by any existing ETPs
What happened: BlackRock CEO Larry Fink details sovereign wealth fund interest in Bitcoin
How is this significant?
- In a Bloomberg interview at Davos this week, BlackRock CEO Larry Fink continued his recent support for digital assets, shedding some light on the calibre of clients conversing about allocations with the world’s largest asset manager
- Speaking to Francine Lacqua and G42 CEO Peng Xiao, he explained Bitcoin’s global appeal by saying "If you're afraid of currency debasement, or stability... You can have an internationally-based instrument called Bitcoin that will overcome those local fears”
- He also outlined the scale of interest in the asset, revealing “I was with a sovereign wealth fund during this week, and that was the conversation; 'should we allocate 2% or 5%?'... If everyone adopted that conversation, it would be $500,000, $600,000, $700,000 per Bitcoin"
- Fink was however keen to couch any specific price expectations based on that statement, adding “I'm not promoting it by the way. That is not my promotion”
- The BlackRock CEO also continued to champion tokenisation, stating “I want the SEC to rapidly approve the tokenisation of bonds and stocks, that will simplify things, make things easier… it would save more money for more people, bring down the cost of ownership of stocks and bonds”
What happened: US regulators facilitate banking custody of crypto
How is this significant?
- Within days of Gary Gensler’s departure from leadership, the SEC “gave crypto its first policy win” this week, as the agency confirmed the creation of a Crypto Task Force on Tuesday, to be led by commissioner Hester Peirce
- Acting SEC chair Mark Uyeda acknowledged the agency’s attitudes and shortcomings under the previous administration, as a statement announcing the task force read “To date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way… Clarity regarding who must register, and practical solutions for those seeking to register, have been elusive”
- This was rapidly followed by the agency revoking SAB 121—a controversial accountancy guideline that required banks to hold custodied digital assets as liabilities on their own balance sheets
- SAB 121 thus greatly complicated custody and applied a different standard for crypto than for other assets—despite Gensler’s repeated public assumptions that digital assets fit neatly into all existing frameworks
- Despite a bipartisan repeal in Congress, president Biden used his veto to protect SAB 121, raising the financial and regulatory burden for banks to interact with digital assets
- SAB 121 has now been replaced by SAB 122, which “rescinds the interpretive guidance included in Topic 5.FF in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users”
- Peirce, perhaps the most openly pro-crypto commissioner, celebrated the “reviled” legislation’s demise, tweeting “Bye Bye SAB 121! It’s not been fun”
- CNBC noted numerous banking industry leaders recently revealed intentions to enter crypto if the regulatory environment allowed them to hold such assets—including BNY, Morgan Stanley, Bank of America, and Goldman Sachs
What happened: Former Binance CEO Changpeng Zhao launches family office
How is this significant?
- Changpeng “CZ” Zhao, the founder and former CEO of Binance, moved to further distance himself from the exchange he created, but which sent him to prison for four months after he pled guilty to AML shortfalls
- This week he reformed Binance Labs, the former venture capital arm of the exchange, into YZi Labs, a family office
- Following his release from prison, Zhao pledged that his future investment endeavours would prioritise impact over returns
- According to a statement, YZi Labs currently manages around $10bn in digital assets, but the new family office will diversify its investment portfolio beyond just the crypto industry, adding exposure to A.I. and biotech
- YZi will invest a broad range of capital between $500,000 and $50m, including direct purchase of liquid tokens from crypto projects
- However, despite statements from Zhao that YZi will be “purely a family office investment vehicle” a subsequent clarification from the office claimed it is “a venture capital and incubator firm dedicated to fostering innovation and supporting investments across various sectors”
- Zhao is currently the richest man in crypto, with a personal fortune of almost $70bn ranking him 22nd worldwide in Bloomberg’s most recent billionaire index
What happened: Andreessen Horowitz shuts UK office to concentrate on US operations
How is this significant?
- Leading digital asset venture capital firm Andreessen Horowitz (a16z) announced this week that it’s pulling back from its London unit within a year of its founding—due to the bullish political positioning of its US home market
- Crypto unit COO (and London lead) Anthony Albanese tweeted “we have chosen to focus on the US given the new administration’s strong policy momentum and will therefore be closing our UK office… This doesn’t change our confidence in the UK’s growing role in crypto and blockchain. We will continue to invest in great entrepreneurs no matter where they are in the world, including the UK”
- At $7.6bn, a16z is one of the largest investors in the digital asset industry, and its London office was previously treated as a victory over the US from the UK—which now has to play catchup to the new Trump administration
- Both a16z co-founders publicly backed Trump in the US elections, with Marc Andreessen viewed as particularly influential in steering business policy
What happened: Political news—Trump issues digital asset executive order
How is this significant?
- Following Donald Trump's inauguration last week, the digital asset industry experienced its first presidential acknowledgement this week, as Trump issued an executive order aimed at “Strengthening American Leadership in Digital Financial Technology”
- The executive order touched upon both artificial intelligence and crypto, and included actionable 30, 60, and 180 day deadlines for the new Presidential Working Group on Digital Asset Markets chaired by "crypto czar" David Sacks
- Within six months, the presidential working group will deliver a report “recommending a regulatory framework and legislative proposals, including evaluating the creation of a digital asset stockpile
- Exploring a "national digital asset stockpile" is viewed by many as a key aspect of the orders, since it could potentially lead to policy-level crypto acquisition
- However, the order didn’t produce a huge effect on the markets, with analysts surmising that it was both expected and lacked specificity—e.g. By using the phrase “national digital asset stockpile”, rather than “Strategic Bitcoin Reserve”
- TD Cowen analysts said that the order was an encouraging first step, but was just the first of many; “This is the easy stuff… It is symbolically important as it reflects how Team Trump prioritizes crypto, but it is not the same as rule changes. Establishing the rules the industry needs will take years, not weeks”
- Cowen analysts also hypothesised that the ambiguous language around a “stockpile” indicated lower likelihood of Trump committing to Bitcoin, as “We see this as unlikely as it could conflict with Donald Trump's core view that the US Dollar deserves to be the global reserve currency… Arguing a Bitcoin reserve would be a hedge to preserve the U.S. role in the global economy seems unlikely to sway Trump”
- Industry reception was positive overall, as Bitwise CIO Matt Hougan claimed “The market will over time realize the executive order is a huge, historic win… [it] establishes crypto as a national priority, and lays an aggressive timeline for new regulation and a strategic reserve”
- Coinbase policy VP Kara Calvert commented “It absolutely changes the fundamentals on the ground. You have a president who embraces digital assets and created an advisory council that recognizes the need for non-government expertise. That’s really exciting”
- Split Capital founder Zaheer Ebtikar agreed, stating “Evaluating a potential national digital asset stockpile is as optimistic as real news could be”
- Tidal Financial Group CIO Mike Venuto also viewed the order as a positive, telling CNBC “Regulation has been done through enforcement. That’s a mess. We do need some sort of government-efficient group that can come in and regulate this and make it make sense”
- ARK Invest CEO Cathie Wood believes Trump is now “ushering in the next phase of the crypto revolution” as the new government proves its pro-crypto credentials
- One person who should know better about those credentials than anybody else is the government’s new “Crypto Czar” and working group chief David Sacks; he told FOX Business that the order proved Trump’s commitment to the industry
- He said “I've heard so many outrageous stories by founders, by entrepreneurs, the Biden administration would not tell them what the rules of the road were, and they would then get prosecuted. And what the industry wants more than anything else is regulatory clarity”
- Other key aspects of the executive order were support for “lawful and legitimate dollar-backed stablecoins” (as they support the US dollar’s international status) whilst prohibiting any American CBDC (due to surveillance concerns)
- The ECB responded by attempting to frame the stablecoin support as a reason to push forward plans for a Digital Euro CBDC
- ECB board member Piero Cippolone told Reuters “I guess the key word here in Trump's executive order is worldwide. This solution, you all know, further disintermediates banks as they lose fees, they lose clients… That's why we need a Digital Euro”
- Elsewhere in US government, DOGE (Department of Government Efficiency) chief Elon Musk revealed plans to explore blockchain as a means “to cut costs and eliminate wasteful spending, fraud and abuse”
- Sam Hammond of the Foundation for American Innovation commented that “an internal government blockchain could be used to track spending, documents and contracts in a way that’s fully secure and transparent”
- Trump’s executive order and legislative support for digital assets seemingly spurred other nations and jurisdictions to review their policies on crypto, ranging from Japan, Malaysia, and Thailand, to pan-African activity
- Chris Maurice, founder of Yellow Card (an African exchange present in 20 countries on the continent) told Bloomberg “We’re having conversations with banks and other major financial institutions that a couple of months ago, they didn’t want to hear about crypto, they didn’t want to talk about it. Now these guys are calling us, they’re interested. They want to understand how do they get into the space. I think obviously part of it is the Trump effect”
- He added “Over the last two years the regulatory landscape has gotten so much better on the continent. Now this added pressure from Trump, I think, it will just continue to grow”
What happened: MicroStrategy adds to Bitcoin stockpile, adopts new fundraising method
How is this significant?
- Enterprise software firm (and Bitcoin balance sheet leading light) MicroStrategy added yet further to its considerable Bitcoin coffers this week, revealing another purchase in excess of $1bn
- On Monday, a new 8-k SEC filing showed that MicroStrategy recently purchased for approximately 10,107 Bitcoin for $1.1 billion at an average price of $105,596
- This brings the firm’s total holdings to 471,107 Bitcoin—over 2% of the total supply, worth over $47bn at the time of writing
- Additionally, MicroStrategy shareholders voted to increase the number of authorised Class A common stock and preferred stock to help finance further Bitcoin purchases
- The convertible preferred stock (STRK) will offer 2.5 million shares of MicroStrategy's MSTR Series perpetual strike preferred stock
- Industry publication TheBlock notes that “MicroStrategy also has the option to buy back all outstanding preferred stock for cash if the total value drops below 25% of the original issued amount or if certain tax events occur. The redemption price will match the stock’s liquidation value, plus any unpaid dividends”
What happened: Ripple secure money transmitter licences in multiple US states
How is this significant?
- Digital asset firm Ripple, developers of the XRP token, aims to increase its presence within the US after securing money transmitter licences in the economic powerhouse states of Texas and New York
- This allows Ripple to deploy its cross-border payments solution within licenced states in the US, managed end-to-end by Ripple
- The company’s North American MD Joana Xie “We’re continuing to see more interest from financial institutions to crypto businesses that want to unlock the benefits of crypto and blockchain for faster, cost-efficient and 24/7 cross-border payments”
- Ripple now holds 55 money transmitter licences, including approval in 33 US states
- CEO Brad Garlinghouse said that an increased concentration on the US market could be attributed to the “Trump Effect”, after the company itself was a major contributor to evolving political attitudes following legal victories over the SEC