Take a look at 70 Crypto-AI projects, These "virtual intelligent agents" that can autonomously learn, adapt, and execute tasks within a decentralized blockchain network.

Unlike simple AI assistants, are envisioned to become independent entities capable of making economic decisions, managing assets, and even participating in governance. The report identifies six major tracks within this ecosystem: AI Agent Infrastructure, Launchpads, Memes, DeFI, TEE Verifiable Agents, and Applications.

Key Themes and Concepts:

• Definition of an AI Agent:Not just simple AI assistants, but rather "virtual intelligent agents" capable of self-learning and autonomous task execution on a blockchain network.
• They are "independent entities that can operate freely within a decentralized blockchain network" without constant human instruction.
• They can manage assets, execute contracts, and make decisions, functioning as "virtual residents" within the blockchain ecosystem.
• The text emphasizes their ability to "think independently like humans and even complete complex tasks without any human intervention."

1. Market Size and Growth:

• The AI Agent track has reached a significant market capitalization, with the article citing "$13.3 billion" total market cap and over "$11 billion" within the 70 projects they analyzed.
• Massive interest in the space is driven by "enormous technical potential" and "vast market demand," combining AI capabilities with the decentralized nature of blockchain.
• Messari predicts "by the end of 2025, 90% of on-chain transactions will no longer be initiated by real humans" but by AI agents.

1. Driving Forces Behind the Shift:

• Eliminating Human Error: AI agents can process large amounts of data faster and more accurately than humans, reducing errors in contract execution and other tasks.
• Small Payments and High-Frequency Trading: AI agents enable more frequent and efficient on-chain transactions. The decreasing transaction costs on L1/L2 platforms like Solana and Base are facilitating AI-driven trading.
• Invisible Infrastructure: Users are increasingly willing to delegate tasks to AI agents, embracing automation, particularly in decentralized finance.

1. "DEFAI (AI applications in decentralized finance) refers to the integration of artificial intelligence technology with the decentralized finance (DeFi) ecosystem, aiming to achieve smarter automated trading, asset management, and risk control."

• TEE Verifiable Agents: Utilizes Trusted Execution Environments (TEE) to create secure and verifiable environments for AI Agents (e.g., $Pha, $METAV, $SPORE, $Focai). This ensures the autonomy and security of AI agents in sensitive operations.

1. Examples of AI Agent Functionality:

• Autonomous trading bots: AI agents that automatically buy and sell assets on blockchain based on market data and pre-programmed strategies.
• Portfolio management: AI Agents can optimize investment portfolios based on real-time market conditions.
• Smart contract execution: AI agents can autonomously trigger smart contract functions based on external data feeds.
• Social media interaction: AI Agents that engage with users on Twitter, Telegram, and Discord.
• Creative AI: Generating AI art, music, and video content, as well as generating memes and other forms of content.
• Game agents: AI agents playing and interacting within virtual gaming worlds.

1. Future Outlook and Challenges:

• AI Agents are expected to become increasingly autonomous and intelligent, potentially evolving into "economic agents" with independent decision-making capabilities.
• Challenges include:
• Deep integration of diverse technologies
• Data privacy and security concerns, especially with sensitive financial information
• Lack of regulatory clarity and policies specific to AI Agents
• Market education on how these technologies work and what they mean for users

• The integration of AI and blockchain may disrupt traditional business models and redefine the relationship between humans and machines.

1. Convergence and Exponential Growth:

• Theme: The report highlights the accelerating convergence of various technologies. It suggests that the value and impact of these technologies increase exponentially as they interconnect.

• Evidence: The provided chart on “Row 2X Wheat Grains Value Year Computers Crossed The Same Compounding Threshold” demonstrates this concept of exponential growth. It shows how an increase in “Row” by 8 (2^3) translates to dramatic increases in both "wheat" and "computer" value over time.
• Implication: This means the transformative effects of these technologies are not linear but rather grow at an increasing rate.

1. Artificial Intelligence (AI) as a Catalyst:

• Theme: AI is presented as a powerful enabling technology that will accelerate progress across different fields.
• Evidence: The report mentions AI's impact on robotaxis, drug development, and software engineering. The graph showcasing drug development efficiency highlights the dramatic reductions in timelines and error rates due to AI adoption.

• Implication: AI will unlock significant market opportunities by automating processes, reducing costs, and accelerating innovation cycles.

1. Bitcoin's Maturation as a Monetary System and Store of Value:

• Theme: Bitcoin is evolving into a more robust monetary system, supported by strong network fundamentals and growing institutional adoption.
• Evidence: The report details events in 2024 that increased bitcoin’s legitimacy, including the launch of spot Bitcoin ETFs, the fourth Bitcoin halving (which reduced its inflation rate to less than gold's), an all-time high hash rate, and increased institutional holding of the cryptocurrency.

• Implication: The data suggests that Bitcoin has the potential to gain further adoption as a store of value. Bitcoin's decreasing volatility and high risk-adjusted returns support this view.

1. Stablecoins as a Disruptive Force in Payments:

• Theme: Stablecoins are rapidly gaining traction as a means of payment and are disrupting traditional payment systems.
• Evidence: The report highlights that the annualized transaction value of stablecoins exceeded that of Visa and Mastercard in 2024. Also, December 2024 set new stablecoin volume records and that stablecoins are becoming ‘multichain’ - penetrating nearly every major layer 1 blockchain.

• Implication: Stablecoins are growing faster than traditional processors and becoming a preferred option in many emerging markets because of their low fees.

1. Scaling Blockchains for Broader Adoption:

• Theme: Layer 2 scaling solutions are crucial for enabling wider blockchain adoption by improving transaction speed, lowering costs, and expanding access for retail investors.
• Evidence: The report details that Layer 2s like Arbitrum, Base, and Optimism are seeing increased activity, especially with smaller transaction sizes below $100. Also, DeFi surged to all-time highs and decentralized exchanges are beginning to take market share from centralized exchanges.
• Implication: The data suggests a shift to a more user-friendly decentralized finance ecosystem that serves retail investors.

1. Robotaxis as the Future of Transportation:

• Theme: Autonomous electric vehicles, especially robotaxis, are poised to transform personal mobility by reducing costs and improving safety.
• Evidence: The report contrasts the high cost of human-driven transportation with the much lower estimated cost of future robotaxi services. They believe that Wright's law will bring the cost of batteries down to the point that robotaxis could be profitable at $15,000.

• Implication: Robotaxis could create a multi-trillion dollar market by making transportation more accessible and cheaper.

1. Market Volatility and Political Impact:

• Trump's Tariffs Trigger Market Downturn: New tariffs imposed by President Trump caused a significant market correction, resulting in $2 billion in liquidations. This demonstrates the sensitivity of the crypto market to political events and macroeconomic factors.

• Broader Crypto Sell-Off: This event led to a wider downturn, with Bitcoin dropping below $100,000, and Ethereum falling by nearly 20%. Solana, XRP, Dogecoin, and Cardano also experienced notable declines.
• Quote: "Market data shows most altcoins faced similar struggles. Ethereum fell nearly 20%, finding support just above the $2,500 mark. On the other hand, Solana dropped 10%, landing at $195. XRP declined 17% to $2.3 while other major assets, including Dogecoin and Cardano, lost around 20% each."

2. Institutional Investment and ETF Inflows:

• Bitcoin and XRP Lead Inflows: Despite volatility, Bitcoin and XRP led a $527 million inflow recovery. This suggests that these coins are still drawing significant institutional interest.
• Quote: "Bitcoin, XRP lead $527 million inflow recovery despite volatility"
• Spot Bitcoin ETFs See Record Inflows: US spot Bitcoin ETFs witnessed over $5 billion in net inflows in January, indicating growing mainstream acceptance of crypto as an investment vehicle. BlackRock's iShares Bitcoin Trust (IBIT) led these inflows with $3.23 billion.

3. Regulatory Landscape and Government Holdings:

• Russia to Launch Crypto Mining Registry: Russia plans to launch a nationwide registry for crypto mining equipment, indicating increased government oversight of the sector.
• India Reconsiders Crypto Policy: India is reevaluating its crypto policy but tightening its tax regulations, suggesting a complex and evolving regulatory environment.
• Hong Kong Regulator Omits XRP: Ripple's XRP was omitted from Hong Kong's regulator's approved list of cryptos, highlighting potential challenges for its adoption in some markets.
• Senator Lummis Opposes U.S. Marshals Bitcoin Sale: Senator Cynthia Lummis has vocally opposed the U.S. Marshals Service selling 69,370 seized Bitcoin, arguing it's a poor financial decision. She emphasizes the lost opportunity cost seen in past sales.

• Trump's National Digital Asset Stockpile Plan: President Trump's plan to keep rather than sell government Bitcoin aligns with Lummis' perspective.

• Lummis's BITCOIN Act: Senator Lummis has also proposed the BITCOIN Act, which would require the U.S. Treasury to buy 200,000 Bitcoin per year to establish a strategic reserve.

4. DeFi and Technological Innovations:

• DeFi Evolution in 2025: DeFi is predicted to see the emergence of smart accounts and AI-driven trading.
• Quote: "DeFi in 2025 promises smart accounts and AI-driven trading evolution"
• AI-Powered DeFi Products: AI is increasingly integrated into the DeFi space.
• Quote: "AI Builds First Deepseek Powered DeFAI Product"
• Finacash Launches No KYC Prepaid Card: Finacash has introduced a prepaid card that allows for crypto to be spent directly from any web3 wallet, increasing the utility of crypto assets.

6. Stablecoins and Tether:

• Stablecoin Volume Surpasses Visa and Mastercard: Stablecoins have surpassed Visa and Mastercard in transfer volume, demonstrating their growing importance in the financial landscape.

• Tether's BTC Holdings: Tether disclosed significant holdings of 83,758 BTC and a $13 billion profit in 2024.

7. Security and Hacks:

• CEXs Hit Hard by Bad Actors: Bad actors stole an estimated $80 million in January with centralized crypto exchanges (CEXs) being the hardest hit.

8. Other Key Points:

• Grayscale Files to Convert XRP into an ETF: Grayscale is seeking to convert its XRP trust into an ETF, which could expand the investment options for this cryptocurrency.
• CryptoSlate Alpha Membership: The platform has a membership program (CryptoSlate Alpha) offering exclusive research and analysis, utilizing a Solana-based NFT membership model.

Date: October 26, 2023

1. Introduction

This episode discusses a complex overview of the "Bitcoin Staking" leveraging largely idle, capital held in Bitcoin to enhance the security of Proof-of-Stake (PoS) blockchains.

2. Key Problems and Motivation

• PoS Security Needs Capital: PoS chains are secured by staked capital. Attracting sufficient capital can be expensive, particularly for newer or smaller chains. This often results in high inflation rates to incentivize staking, which can hinder long-term growth. The litepaper uses the example of Cosmos ecosystem where inflation rates of 20% - 100% are quite common.
• Bitcoin's Idle Capital: Bitcoin, the largest cryptocurrency, is secured by Proof-of-Work (PoW). The Bitcoin asset itself is not directly used for securing the chain, resulting in a vast amount of idle capital. This capital is less accessible for yield-generating activities due to security concerns around bridging and centralized custodians. "Most of the Bitcoin asset sits idle and is not deployed."
• Security-Utility Tension: High inflation rates in PoS chains create a tension between attracting capital for security and incentivizing application development on the chain. This is illustrated in the example of Akash, where initial inflation is used to secure the network and incentivize providers.
• Bridging Risk: Existing Bitcoin bridges to PoS chains are often centralized or rely on multi-signature arrangements, raising security concerns. "Such bridges and centralized custodians are considered too risky for many bitcoin holders."

3. The Proposed Solution: Bitcoin Staking

The paper proposes a Bitcoin staking protocol that allows Bitcoin holders to earn yield by staking their coins to secure PoS chains. Key features include:

• Two-Sided Marketplace: The protocol creates a marketplace where PoS chains seeking security can pay Bitcoin holders for staking their BTC. "Bitcoin staking is a two-sided market place (Figure 1). On the one side are PoS chains which need security and are willing to pay yields for it. On the other side are bitcoin holders who have the capital and want to earn yield on it."
• Remote Staking: Bitcoin is not bridged to the PoS chain. It remains locked on the Bitcoin blockchain, but is used to provide security assurances to the PoS chain. "lock the staked bitcoins in a contract on the Bitcoin chain and then slash the stake when there is a protocol violation on the consumer PoS chain."
• Full Slashability: The protocol provides a guarantee that if a staker acts maliciously on the PoS chain, a portion of their stake (1/3) will be slashed. "Whenever there is a safety violation, 1/3 of the Bitcoin stake is guaranteed to be slashed."
• Staker Security: Honest stakers are guaranteed to be able to withdraw their funds. "Each Bitcoin staker is guaranteed to be able to withdraw its funds, or unbond, as long as the staker follows the PoS protocol honestly."
• Fast Unbonding: Unbonding of staked bitcoins is designed to be fast and secure without the need for social consensus. "Unbonding of the staked bitcoins is guaranteed to be secure and fast without the need of social consensus."
• Trustless Staking: The stakers have full control over their funds on the Bitcoin network and can always withdraw provided they have not committed safety violations on the PoS chain. "Withdrawal censorship is not possible in our Bitcoin staking protocol. Thus, our protocol provides trustless staking."

I. Bitcoin Price Action & Federal Reserve Influence:

• FOMC Meeting Impact: Analysts at 21Shares suggest that a surprise interest rate cut by the Federal Open Market Committee (FOMC) could trigger a significant Bitcoin rally, potentially pushing it above $110,000.
• Rate Cut Catalyst: If the Fed signals multiple rate cuts, it could provide the catalyst for Bitcoin to break above $110,000 and target $125,000 and $150,000. This is further influenced by President Trump's public call for interest rate reductions.
• PCE Data: The upcoming Personal Consumption Expenditure (PCE) price index release is also critical. Cooler-than-expected data could boost Bitcoin, while hotter data could cause a price drop. These factors could make the next 48 hours highly volatile.

II. Institutional Adoption and Financialization of Bitcoin:

• Bank Custody of Bitcoin: The SEC has revoked Staff Accounting Bulletin No. 121 (SAB 121), which was preventing banks from offering Bitcoin custody services.
• Mainstream Adoption: The availability of institutional custody will likely speed up the mainstream adoption of Bitcoin, providing more secure and trusted storage options.
• SoFi's Return to Crypto: SoFi CEO Anthony Noto stated their company will move "as aggressively as anyone else" into the crypto space when regulations become clear, including potential services in custody and clearing.

IV. The Altcoin Landscape & AI Influence:

• Memecoin Degeneracy: The market for memecoins is saturated, leading to fractured liquidity and a "hop-from-coin-to-coin" mentality, similar to the hookup culture enabled by dating apps. The source states, "Markets of souless dilution" and "the latter are literally designed to ensure pain and misery."
• DeepSeek AI Impact on FET: The rise of DeepSeek AI is negatively impacting decentralized AI projects like Artificial Superintelligence Alliance [FET]. The competition between traditional and decentralized AI networks is causing bearish trends, contributing to FET's recent 20% dip.

VI. Macroeconomic Concerns and Bitcoin:

• Bitcoin as an Alternative: Since 2020, gold has increased by 200% against bonds, while Bitcoin has risen by 2000%. This shift from traditional government bonds signals a potential sovereign debt crisis and positions Bitcoin as an alternative asset class.
• Reverse Repo Market: The liquidity in the reverse repo market has fallen below $100 billion, which some speculate could trigger a liquidity crisis and force the Federal Reserve to resume quantitative easing (QE).

VII. Regulatory Developments and Political Influence:

• Trump Administration Impact: SoFi's CEO indicated that they will be "aggressively tied to crypto" once regulatory clarity emerges under the Trump administration. President Trump's influence on financial and crypto regulations is noted across multiple sources.
• SEC Shift: The SEC under acting Chair Mark Uyeda is moving away from an enforcement-heavy approach towards a more innovation-friendly regulatory framework.
• State Adoption: Utah has advanced a bill to allow state Bitcoin and digital asset investments, joining 12 other states considering similar legislation. The bill permits the state to allocate up to 5% of certain public funds into "qualifying digital assets," including Bitcoin and state-approved stablecoins.

VIII. Other Notable Developments:

• SBF Pardon: Sam Bankman-Fried's parents are reportedly exploring avenues to secure a presidential pardon for their son from Donald Trump. However, betting markets indicate a low probability of success. SBF's heavy political donations to the Democratic Party may complicate any attempt at clemency from a Trump administration.
• Mining and AI Convergence: There are reports that Bitcoin miners are switching to AI and HPC (High Performance Computing) due to rising costs and decreased revenues.
• Bitcoin Tracker: There are ongoing efforts to track state and federal Bitcoin legislation, indicating a growing awareness and interest in the potential for legislative action.

Bitwise released a report on TradFi Bitcoin adoption for 2025 available here.

Increased Crypto Adoption & Allocations:

Doubled Allocations: The percentage of advisors allocating to crypto in client accounts doubled year-over-year, reaching 22% in 2024, an all-time high for the survey. This is a substantial increase from 11% in 2023. "Twenty-two percent (22%) of advisors reported allocating to crypto in client accounts this past year. That’s double the rate in 2023 (11%) and an all-time high for the survey."

Intent to Increase: Among those already allocating to crypto, 99% plan to maintain or increase their exposure in 2025. "Ninety-nine percent (99%) of advisors who currently have an allocation to crypto in client accounts plan to either maintain or increase that exposure in 2025."

More Likely to Allocate: Even those who haven’t allocated to crypto are showing increased interest: 19% are "definitely" or "probably" planning to add exposure in 2025, more than double last year's 8%.

Strong Client Interest:

High Inquiry Rate: 96% of advisors received a question about crypto from clients in 2024, the highest rate ever recorded in the survey. This signifies that client interest in crypto is at a peak and underscores the need for advisors to be well-versed in the asset class. "Ninety-six percent (96%) of advisors received a question about crypto from clients last year."

Clients Investing Independently: 71% of advisors reported that "some" or "all" of their clients were investing in crypto on their own, outside of the advisory relationship. "Seventy-one percent (71%) of advisors said “some” or “all” of their clients were investing in crypto on their own." This represents a significant opportunity for advisors to integrate these holdings into client's overall wealth plans.

Evolving Preferences & Investment Vehicles:

Preference for Crypto Equity ETFs: When considering crypto exposure, the most popular choice among advisors is crypto equity ETFs (25%). This preference likely stems from the familiarity of the ETF structure and the ease of access it provides. "When asked what crypto exposure they were most interested in allocating to in 2025, crypto equity ETFs were the favorite among advisors."

Spot Crypto ETF Interest Surging: Interest in spot crypto ETFs is also increasing, with 22% of advisors choosing them. This growth is likely due to the recent approval and successful launches of Bitcoin and Ethereum ETFs.

ETFs Preferred Overall: 71% of advisors stated that exchange-traded funds are their preferred way to invest in crypto, demonstrating the appeal of this more traditional investment wrapper. "71% of advisors chose an exchange-traded fund as their preferred way to invest in crypto"

The Impact of the 2024 Election:

Increased Likelihood to Invest: The 2024 U.S. election results have had a positive impact on advisor attitudes toward crypto with 56% of advisors saying they were more likely to invest in crypto in 2025 as a result. "Fifty-six percent (56%) of advisors said they were more likely to invest in crypto in 2025 as a result of the election results."

Strategic Bitcoin Reserve: There is divided opinion on the possibility of the U.S. establishing a strategic bitcoin reserve in 2025 with 45% of advisors thinking it will happen and 55% thinking it will not.

Barriers to Crypto Adoption:

Regulatory Uncertainty: Despite a more favorable regulatory outlook, 50% of advisors still cite regulatory uncertainty as the top obstacle to future crypto investments. While this number is down from prior years (60-65%), it remains a major concern. "While 50% of advisors cited regulatory uncertainty as the top obstacle to future crypto investments, the figure dropped markedly from prior surveys".

Volatility: Volatility is still a significant concern, with 47% of advisors citing it as a barrier. While down from 2022 and 2021 (60% and 53% respectively), this indicates the need for volatility mitigation strategies.

I. Bitcoin Market Dynamics and Price Action

• Recent Price Volatility: Bitcoin experienced a significant surge from $68K in November to a new all-time high of $109K, followed by a period of profit-taking and subsequent market adjustments. A recent drop of over 5% in a 24-hour period shows volatility remains a key characteristic.

• Profit-Taking Decline: Profit-taking has decreased dramatically from $4.5 billion in December to $316 million more recently, suggesting a potential shift in market sentiment.

• FOMC Impact: The upcoming Federal Open Market Committee (FOMC) meeting is a significant factor, creating uncertainty and potentially leading to further market fluctuations.

• Potential for Price Increase: A return of "FOMO" (fear of missing out) alongside reduced greed could trigger a new wave of buying, particularly after the FOMC meeting.
• Bitcoin Futures: Bitcoin futures basis turned negative for the first time since August amid recent market volatility, which may indicate increased bearish sentiment.

II. The US Dollar vs. Bitcoin Narrative

• Goldman Sachs' Perspective: Goldman Sachs CEO David Solomon does not see Bitcoin as a threat to the US dollar, considering it an "interesting speculative asset."

• Stablecoin and Dollar Dominance: There's a view that overcollateralized, dollar-pegged stablecoins could extend US dollar dominance by providing global access to dollars.

• Robert Kiyosaki's Counterpoint: Financial analyst Robert Kiyosaki argues Bitcoin is superior to the "fake U.S. dollar", citing Gresham's Law (bad money drives out good money) and Metcalfe's Law (network value increases with users).

• Government Bitcoin Holdings: The US government’s potential increase in Bitcoin holdings could push prices higher. The government currently holds around 198,000 BTC, valued at $20.71 billion.

III. Institutional Adoption and Bitcoin ETFs

• Transformative Impact of ETFs: The launch of spot Bitcoin ETFs marked a significant milestone, bridging traditional finance and the crypto market. They have accumulated over 1.1 million BTC under management by the end of the first year.

• Attracting New Investors: ETFs provided a regulated, accessible way for investors, previously deterred by technical complexities, to enter the Bitcoin market.
• Regulatory Shift: The SEC's approval was the result of increased market oversight mechanisms and growing pressure from financial institutions and investors.

• Key Players: Companies like BlackRock, Fidelity, VanEck, Ark Invest, and Bitwise are now offering Bitcoin ETFs, signaling institutional involvement.

IV. Emerging Trends: AI and Crypto

• DeepSeek's Impact: DeepSeek, a cost-effective AI model, is causing disruption in both AI and crypto markets. Some analysts predict a pullback to $70,000 for Bitcoin due to this AI breakthrough.

• Disruption in AI Economics: DeepSeek is challenging the dominance of large US AI firms by offering competitive performance at a lower cost and reducing the reliance on expensive data infrastructure, creating a ripple effect across investment markets.

• Venice Platform and VVV Token: Erik Voorhees' AI platform, Venice, launched its VVV token on the Ethereum Layer 2 Base network. Half of the tokens were airdropped to Venice users and AI community projects.

• Venice's Mission: Venice aims to offer private, uncensored AI interactions, contrasting with centralized control.

V. Other Market Developments

• CZ's Return to YZi Labs: Changpeng Zhao (CZ), former CEO of Binance, is taking an active role in investment activities at YZi Labs, formerly Binance Labs, which indicates ongoing interest and influence of Binance in the crypto venture capital space despite past legal issues.
• Security Concerns: Recent instances of social media accounts being hacked (Visa, Dean Norris) to promote fake Solana tokens highlight ongoing security risks and scams within the crypto space.

Key Topics:

1. U.S. Government's Pro-Crypto Stance:

• Executive Order: President Trump has signed an executive order, “Strengthening American Leadership in Digital Financial Technology,” that aims to foster financial innovation, ban central bank digital currencies (CBDCs), and establish a working group to explore a strategic Bitcoin reserve. This is a major policy shift from previous administrations.

• CBDC Ban: The order explicitly prohibits federal agencies from promoting or creating CBDCs, citing concerns about financial stability, privacy, and sovereignty.

• Digital Asset Stockpile: The executive order directs the Presidential Working Group on Digital Asset Markets to evaluate the creation of a national digital asset stockpile, potentially derived from seized cryptocurrencies.

• Regulatory Clarity: The order aims to establish technology-neutral regulations, frameworks for emerging technologies, transparent decision-making, and well-defined jurisdictional boundaries to support digital asset innovation.

1. Senator Lummis's Role:

• Subcommittee Chair: Senator Cynthia Lummis, known as the "Crypto Senator," has been named Chair of the Senate Banking Subcommittee on Digital Assets, signaling a focus on establishing clear regulatory frameworks for digital assets.
• Bipartisan Legislation: Lummis aims to pass bipartisan legislation for digital assets and strengthen the US dollar, indicating broad support for regulatory clarity in this space.

1. Bitcoin ETFs' Impact and Adoption:

• Successful Debut: Bitcoin ETFs have had an incredibly successful first year, attracting $115 billion in Assets Under Management (AUM) and $32 billion in net inflows. They now hold approximately 5.7% of Bitcoin's circulating supply.

• Institutional Adoption: Bitcoin ETFs have driven significant institutional adoption, attracting both retail investors and professional investors such as hedge funds and major financial institutions.

• BlackRock's Dominance: BlackRock's iShares Bitcoin ETF (IBIT) has accumulated the most Bitcoin, approximately 540,000 BTC, dwarfing the holdings of other ETFs.

1. Bitcoin's Price and Market Dynamics:

• Price Surge: Bitcoin’s price has recently reached all-time highs, surpassing $108,000, driven by the election of President Trump and the positive regulatory developments.
• ETF Impact on Price: Spot Bitcoin ETF net flows have had a measurable influence on Bitcoin's price movements, though other market conditions and investor sentiment also play a role.

1. BlackRock's Optimistic Outlook:

• $700,000 Bitcoin: BlackRock CEO Larry Fink has stated that if investors allocated 2-5% of their portfolios to Bitcoin, its price could potentially reach $700,000.

• Bitcoin as a Global Instrument: Fink suggests that Bitcoin can be a valuable international instrument for individuals in countries facing currency debasement or economic instability.

1. SEC's Approach to Crypto:

• Crypto Task Force: The SEC has formed a new crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets. Commissioner Hester Peirce will lead the task force.
• SAB 121 Controversy The House and Senate have voted to overturn the SEC's rule SAB 121 which requires banks to hold customers’ crypto on their balance sheets, however President Biden has stated he would veto this.

1. Legal and Security Considerations:

• Tornado Cash Sanctions Reversed: A U.S. District Court has reversed sanctions on the crypto mixer Tornado Cash, stating that immutable smart contracts are not "ownable" and therefore not subject to sanctions.

• Pump.fun Hack: The pump.fun hack highlights the risks associated with digital asset platforms where a developer stole $2M in tokens and then was arrested by British law enforcement.

1. Stablecoins and US Dollar Sovereignty:

• Dollar-Backed Stablecoins: The U.S. government supports the development and growth of legitimate dollar-backed stablecoins to maintain the dollar's global dominance.

1. "Trump-o-nomics" and "QE for the Poor" (Black or White?):

• Industrial Policy: Hayes envisions Trump's administration implementing a policy similar to China's, involving government subsidies and tax breaks to re-shore critical industries in America. These companies will receive cheap bank financing, and be incentivized to hire American workers, leading to increased consumer spending. He states, “The plan is to run nominal GDP hot by providing government tax credits and subsidies to re-shore critical industries (shipbuilding, semiconductor fabs, auto manufacturing, etc.).”
• Fiscal Spending and Debt: This policy is based on large government deficits, funded by selling bonds to banks. The banks can expand lending because the supplemental leverage ratio (SLR) is predicted to be suspended. This "QE for poor people" will result in a falling debt-to-nominal GDP ratio for the US government, because of increased economic activity.
• Investment Thesis: Hayes advocates buying stocks in sectors favored by government policy. Also, he promotes purchasing gold and, especially, Bitcoin as a hedge against financial repression. "Instead of saving in fiat bonds or bank deposits, purchase gold (the boomer financial repression hedge) or Bitcoin (the millennial financial repression hedge)."

2. The Mechanics of Money Creation (Black or White?):

• Bank Lending and Money Supply: Hayes details, using T-accounts, how banks create money "out of thin air" when they issue loans. "The loan officer at JP Morgan is given the government contract and confidently loans $1,000 to Smith and Wesson. Out of thin air, $1,000 of money is created by the act of loaning money." This is amplified by government stimulus checks and subsidies, which become deposits and fuel economic activity.
• Infinite Treasury Financing: Hayes explains that if regulators exempt certain assets like Treasuries and government backed corporate debt from the SLR, banks could theoretically purchase an infinite amount of government debt, “If Treasuries, central bank reserves, and/or approved corporate debt securities were exempted from the SLR, a bank could purchase an infinite amount of debt without having to encumber themselves with any expensive equity.”
• Constraints: Banks are constrained by the equity capital they must hold against debt assets. However, SLR exemptions can remove this constraint allowing banks to massively expand their lending.
• Lowest Comfortable Level of Reserves (LCLoR): Banks will reduce participation in Treasury auctions when their reserves hit the LCLoR. Hayes observes that the banking system is nearing this level, reducing Treasury bond demand.

3. The "Trump Truth" and Global Monetary Realignment (Trump Truth):

• Catalyst for Change: Hayes argues that Trump's policies and rhetoric, which he calls “Trump Truth,” acts as a catalyst, forcing other countries to address their economic imbalances. He states, “I love Trump Truth because it acts as a catalyst that forces other heads of state to acknowledge the issues their countries face and swing into action.”
• End of Petrodollar: Hayes believes that Trump's policies will lead to an end of the "Petrodollar" system, and the start of a new system.
• Devaluation of the Dollar: Hayes believes that the Trump administration will need to weaken the dollar to encourage domestic manufacturing. He predicts that the easiest way to accomplish this is via a devaluation of the dollar versus gold: He floats figures as high as $10,000 to $20,000 per ounce, saying, "If I were Bessent, I would go big. Big means conducting a $10,000 to $20,000/oz revaluation.”
• Strategic Bitcoin Reserve (BSR): Hayes speculates that the US might adopt a strategic Bitcoin reserve, similar to its gold stockpile. "If Bitcoin is the hardest money ever known, then the strongest government fiat currency is the one whose central bank owns the most Bitcoin."

Bitfinex's Outlook for 2025

1. Bitcoin's Bullish Outlook

• Unprecedented Milestones: Bitcoin has surpassed a $2 trillion market capitalization and $100,000, overtaking silver and Saudi Aramco in market capitalization.
• Mid-Cycle: The report places the market "mid-cycle" following the April 2024 halving and expects a cycle peak around Q3-Q4 2025, approximately 450 days post-halving.
• Institutional Inflows: ETFs are identified as a major force, holding over 1.13 million BTC and experiencing $35.5 billion in cumulative US spot ETF inflows. These inflows are seen as providing consistent buying pressure that will limit the size of future corrections.
• Price Targets: Minimum price targets of $145,000 are projected by mid-2025, with potential to reach $200,000 under favorable conditions. The report states that "...our minimum price target for Bitcoin remains at $140,000." Other models and trends suggest targets between $145,000-$200,000, even potentially higher to $290,000 if 2017 cycles are repeated.
• Volatility Expected: The document acknowledges that volatility is expected in Q1 2025, but sees broader trends pointing to further appreciation.

1. Bitcoin's Halving Cycle & Market Indicators

• Halving Effects: Post-halving years historically see the strongest rallies. A key idea in the document is that “Historically, post-halving years have seen the strongest rallies.”
• Cycle Indicators: Metrics like MVRV, NUPL, and a Bull-Bear Market Cycle Indicator are used to analyze Bitcoin's position in the cycle, showing that the market remains in a bull phase but is not yet at euphoric peaks.
• Pi Cycle Top: This indicator, based on moving averages, projects potential cycle tops between $145,000 and $189,000, but notes the relevance may diminish over time with the integration of Bitcoin into global finance.
• 4-Year Moving Average: Metrics based on the 4 year halving cycle also suggest cycle tops are likely at $145,000 and $189,000.
• Historical Data: Historical performance suggests a general tendency of diminishing returns in Bitcoin markets.
• Corrections: Previous cycles show that post-halving corrections before reaching new ATHs were contained. Corrections in 2017 were 33.2% and 27.1% in 2020. However, corrections in 2024 have been smaller with less volatility.
• Current Cycle: The current bull cycle is seen as somewhat unique, with Bitcoin reaching an all-time high before the 2024 halving due to the surge in demand from investors using ETFs.

1. US Macroeconomic Context

• Labor Market Normalization: The US labor market is gradually normalizing with a slight increase in unemployment to 4.2%, driven by an increased supply of workers rather than job losses, with wage growth remaining robust at 4% annually.
• Housing Market Stability: A projected 2.4% increase in home prices is expected, indicating stable demand, despite elevated mortgage rates. The report states that “a projected 2.4 percent increase in home prices signals stable demand despite elevated mortgage rates”.
• Cautious Fed: The Federal Reserve is expected to proceed cautiously with rate cuts, balancing the cooling job market and persistent inflationary pressures, and will remain restrictive.
• Stock Market Outlook (Trump): Pro-growth policies under a new Trump presidency (tax cuts, deregulation) are seen as beneficial to industrials, financials, and consumer discretionary sectors.
• Debt Ceiling & Liquidity: The reinstatement of the debt ceiling in January 2025 may introduce liquidity via TGA drawdowns, acting as a "quantitative easing" supporting equities.
• Inflation: Inflation remains a critical focus, as the report states, “Inflation remains a critical focus for US policymakers in 2025, as progress toward the Federal Reserve's two percent target remains slow and uneven.” The Fed is likely to proceed cautiously despite the rate cut this week.

• Grayscale Expansion: Grayscale Investments has launched new trusts focusing on Lido DAO (LDO) and Optimism (OP) tokens.

Key Themes and Predictions:

1. Price Surges for Major Cryptocurrencies:

• Prediction: Bitcoin will surpass $200,000, Ethereum will reach $7,000, and Solana will hit $750, all setting new all-time highs.
• Supporting Factors:Continued inflows into Bitcoin ETFs.
• Reduced Bitcoin supply due to the 2024 halving.
• Potential U.S. strategic Bitcoin reserve.
• Growth in Layer 2 scaling solutions for Ethereum (Base, Starknet).
• Increased development and use of Solana for serious projects.

1. Continued Growth of Bitcoin ETFs:

• Prediction: Bitcoin ETFs will attract more inflows in 2025 than in 2024.
• Supporting Factors:Historical patterns from gold ETFs, where the second year saw higher inflows than the first.
• Major wirehouses (Morgan Stanley, Merrill Lynch, etc.) expected to open access to Bitcoin ETFs for their clients.
• Existing investors are predicted to "ladder up" their allocations over time.
• Quote: "The point is: It would be in line with gold’s example for Year 2’s flows to top Year 1’s. Flows petering out would be unusual."

1. Coinbase's Ascent:

• Prediction: Coinbase will surpass Charles Schwab as the most valuable brokerage, with its stock exceeding $700 per share.
• Supporting Factors:Strong growth in the stablecoin business.
• Success of the Base Layer 2 network, generating significant revenue.
• Growth of staking and custody services.
• Quote: "Coinbase is more than just a brokerage."

1. Crypto IPO Wave:

• Prediction: At least five crypto unicorns will go public in the U.S. in 2025.
• Supporting Factors:Favorable market conditions, including rising crypto prices and increased investor demand.
• Improved regulatory and political climate.
• Likely candidates include Circle, Figure, Kraken, Anchorage, and Chainalysis.

1. AI-Driven Memecoin Mania:

• Prediction: Tokens launched by AI agents will spearhead a memecoin mania even bigger than in 2024.
• Supporting Factors:Examples like the "GOAT" memecoin promoted by an AI agent.
• The emergence of AI agents like Clanker that can autonomously launch tokens on Base.
• Quote: "We believe that AI-launched tokens will fuel a new memecoin boom in 2025."

1. Increased Government Adoption:

• Prediction: The number of countries holding Bitcoin will double.
• Supporting Factors:Active consideration of a U.S. strategic bitcoin reserve.
• Legislators from various countries are introducing bills to push for strategic bitcoin reserves.

1. Mainstream Inclusion in Indices:

• Prediction: Coinbase will enter the S&P 500 and MicroStrategy will enter the Nasdaq-100.
• Supporting Factors:This will add crypto exposure to the portfolios of nearly every U.S. investor.
• Significant passive buying pressure is expected from funds tracking these indices.

1. Easing of Crypto Restrictions in 401(k) Plans:

• Prediction: The U.S. Department of Labor will relax its guidance against crypto in 401(k) plans.
• Supporting Factors:Shifting political landscape in DC
• This change would potentially open up billions of dollars in new capital for crypto investments.
• Quote: "If crypto captures 1% of 401(k) assets, that’s $80 billion of new capital entering the space, with a steady flow thereafter."

1. Stablecoin Market Expansion:

• Prediction: Stablecoin assets will double to $400 billion.
• Supporting Factors:Passage of long-awaited stablecoin legislation in the U.S.
• Growth in global trade and remittances using stablecoins.
• Increased integration of stablecoins into fintech apps.
• Overall bullish crypto market.

1. Growth of Tokenized Real-World Assets (RWAs):

• Prediction: The value of tokenized RWAs will surpass $50 billion.
• Supporting Factors:Wall Street's increasing embrace of crypto.
• The advantages of tokenization (instant settlement, lower costs, 24/7 liquidity).
• Support from major figures like BlackRock CEO Larry Fink.

1. Long-Term Bitcoin Dominance:

• Bonus Prediction: By 2029, Bitcoin will overtake the $18 trillion gold market, trading above $1 million per bitcoin.
• Supporting Factors:Bitcoin's historical performance in 4-year cycles.

• Quote: "We think bitcoin will overtake the gold market by 2029."

Cryptocurrency Ownership Correlations

I. Key Themes and Ideas

• Growth and Risk of Cryptocurrency:Cryptocurrency is an increasingly popular, unregulated form of digital currency, "not produced, controlled, or supported by any central bank or government entity."
• It's known for its "unregulated trading and anonymous transactions," contributing to market volatility, fraud, and failures.
• Despite these risks, many people invest, viewing it as a way to make quick money.
• Governments are concerned about its potential to "bankrupt individuals and disrupt worldwide financial markets" and its links to crime.
• Distrust and Anti-Establishment Attitudes:The development of cryptocurrency stemmed from "a strong distrust for mainstream, traditional currencies and financial institutions."
• This distrust extends to other institutions and authorities, linking it to "conspiracy thinking, low levels of analytic and scientific reasoning, anti-science attitudes, the 'need for chaos,' and nonmainstream political orientations."
• Diverse Political Landscape of Crypto Owners:Crypto investors display a heterogeneous collection of ideologies, not easily categorized on a simple left-right spectrum.
• There is evidence of libertarian, populist, anarchist, alt-right, and even far-right/white supremacist attitudes among crypto investors. "some scholars have noted streaks of libertarianism [28], populism [27], and anarchism [29] among investors. However, other studies have reported evidence of alt-right attitudes, far-right extremism, and white supremacist views."
• Psychological Profile of Crypto Owners:Crypto investors are more likely to experience negative emotions like anxiety, depression, impulsivity, and stress.
• They also exhibit higher levels of "nonnormative and 'dark' personality traits," such as narcissism, Machiavellianism, psychopathy, and sadism.
• Information Environment and Media Use:Cryptocurrency ownership is "strongly associated with getting news about current events, public issues, and politics from alternative social media sources"
• They are more likely to use platforms like Telegram, Reddit, Truth Social, and blogs, compared to mainstream news.

II. Key Findings

• Prevalence: 29.79% of respondents reported having owned cryptocurrency at some point.
• Demographics: Crypto owners are significantly younger (Mage = 38.38) and more likely to be male. They are also somewhat more educated, have higher incomes, and are more religious.
• "Respondents who own or have owned cryptocurrency were significantly younger (Mage = 38.38, SDage = 12.94) than those who have not (Mage = 52.86, SDage = 18.84)"
• "cryptocurrency owners are largely male (r =-.24, p<.001)"
• Conspiracism & Thinking:
• Crypto ownership is associated with a greater belief in conspiracy theories, “more strongly associated with greater self-reported generalized pattern perception (r = .30, p < .001), higher levels of a conspiratorial thinking style (r = .23, p<.001), and belief in a greater number of conspiracy theories (r = .33, p<.001)."
• They are more likely to have an intolerance of uncertainty and a desire for simple solutions to problems.
• 
  
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The "Speculative Attack, Season 2," builds upon the original "Speculative Attack" thesis from 2014, arguing that the economic incentive to borrow depreciating fiat currency to invest in Bitcoin remains compelling and has, in fact, become even stronger. The core idea is that this "pair trade" (short fiat, long Bitcoin) is not only rational for individuals but is increasingly driving the actions of institutions, companies, and even central banks, making it the "greatest pair trade in history."

Key Themes and Ideas:

• The Original Speculative Attack Thesis (2014):The core idea is that the economic rationale for borrowing fiat to buy Bitcoin is overwhelmingly favorable.
• The price of Bitcoin is driven by this buying pressure and news of its properties.
• Individuals with debt obligations (mortgages, loans, etc.) are inherently leveraged in favor of this attack, as they can choose to buy Bitcoin instead of paying down liabilities.
• This strategy becomes more potent with weaker local currencies compared to stronger currencies like the US Dollar.
• "The returns figures cited just above are magnified even further if one takes as one’s starting point the Turkish Lira or the Argentinian Peso."
• The authors argue that this thesis has proven correct, with Bitcoin being the world's best performing asset over much of the last 10 years, and that this thesis has now expanded.
• Fiat Currency Degradation:Fiat currencies are in significantly worse shape than in 2014 due to increasing debt/GDP ratios, spiraling deficits, and banking failures.
• "Debt/GDP ratios globally have marched upwards. Deficits have spiraled. Banks have failed, as have entire financial markets, on occasion."
• Approximately one-third of all US dollars have been printed in the past four years.
• "Roughly one third of all dollars in existence have been printed in the past four years, never mind ten."
• Inflation is largely exported through the dollar's reserve currency status, worsening the situation in other fiat currencies.
• The necessary political will to fix these issues is unlikely to exist.
• "The necessary political will simply does not exist, and it is unlikely it ever could."
• This continuing degradation of fiat enhances the speculative attack thesis.

1. Widening Avenues for Attack:

• Fiat currency's monetary premia is leaking into almost every asset class, creating "short dollar positions everywhere, almost all of which are involuntary."
• "Over the past ten years it has become clear that fiat is utterly out of control in leaking de facto monetary premia into practically every asset class in existence."
• There are more "dollar shorts looking for a long" than there is Bitcoin, suggesting a massive potential demand for the asset.
• The financial system is so credit-fueled that it requires a constant increase in the money supply to simply function.
• "This is the essence of the speculative attack. As Bitcoin strengthens, the demand for fiat credit goes up, more is printed, and the problem Bitcoin solves gets even worse."
• Central banks have actively intervened in capital markets by stockpiling securities to prevent the collapse of the fiat system.
• "perhaps the most startling development is the volume of direct intervention in capital markets and stockpiling of listed securities on the balance sheets of central banks worldwide."

Conclusion:

The document concludes that the speculative attack on fiat currencies via Bitcoin is not only still valid but is accelerating. The degradation of fiat, the expansion of avenues for attack, and the increasing adoption of Bitcoin suggest that this trend will continue. The authors believe that this is just the beginning of "Season Two" of the speculative attack, with further development and evolution expected in the coming years.

Analysis of Fidelity's Perspective on Bitcoin's Role in the Digital Asset Ecosystem

Key Themes and Ideas

1. Bitcoin as a Monetary Good:

• Definition: The report emphasizes that a monetary good is valued for its tradability rather than its consumption or use. Historically, various goods have served as money (shells, gold).
• Bitcoin's Properties: Bitcoin exhibits key monetary properties:
• Scarcity: Unlike fiat currencies, Bitcoin has a fixed supply of 21 million. "There will only ever be 21 million bitcoin."
• Durability, Divisibility, Portability, Fungibility, Verifiability: The report compares Bitcoin favorably to gold and fiat currencies in these areas.
• Decentralization & Censorship Resistance: "No one person, corporation, or government owns or controls the Bitcoin network or the rules that govern it."
• Store of Value Thesis: Bitcoin's scarcity and security make it suitable as a store of value in an increasingly digital world. "One of the primary reasons investors attribute value to bitcoin is its scarcity. Its fixed supply is the reason it can be a store of value."

1. Bitcoin vs. Other Digital Assets:

• Fundamentally Different: Fidelity stresses that Bitcoin is not just another digital asset; it’s fundamentally different. It is designed as a monetary good, unlike many others with platform-like aspirations.
• Venture Capital Perspective: Non-bitcoin projects should be viewed with a venture capital lens, focusing on their functionality, scalability, and the network effects they can create.
• No Direct Competition: Other digital assets are not necessarily in direct competition with Bitcoin's primary role as a store of value. "There is not necessarily mutual exclusivity between the success of the Bitcoin network and all other digital asset networks. Rather, the rest of the digital asset ecosystem can fulfill different needs or solve other problems that bitcoin simply does not."

1. Network Effects and Dominance:

• Powerful Network Effects: Monetary networks have extreme network effects. The more participants, the more valuable the network.
• Reflexive Property: Increased adoption drives further adoption due to peer-to-peer transactions. This reflexivity, combined with higher prices, incentivizes miners to increase the network's security.
• Winner-Take-All: The report suggests a "winner-take-all" scenario for monetary goods is likely due to the strong network effect. "This network competition is likely to result in a winner-take-all scenario..."

1. Bitcoin's Resilience and the Lindy Effect:

• Lindy Effect: The longer Bitcoin survives, the more likely it is to endure. "...the longer some non-perishable thing survives, the more likely it is to survive in the future."

1. Bitcoin’s Role in Different Scenarios:

• Multi-Chain World: Even in a world with multiple blockchains, Bitcoin is likely to be the ecosystem’s primary monetary good.
• Winner-Take-All World: Bitcoin is well-positioned to dominate as the most decentralized and immutable blockchain.

1. Investment Framework:

• Separate Frameworks: Investors should adopt separate frameworks for bitcoin (as a monetary good) and other digital assets (as venture capital-like investments).
• Bitcoin's Risk Profile: Bitcoin's risks are lower compared to other digital assets due to its code simplicity and focus on decentralization.
• Bitcoin's Return Drivers: Bitcoin's returns are driven by the broader growth of the digital asset ecosystem and potential instability in traditional macro conditions.
• Non-Bitcoin Risks: Non-bitcoin tokens often face more significant risks, including competition, lack of decentralization, and the possibility of becoming worthless. "The risks with non-bitcoin tokens certainly ranges on a case-by-case basis and tends to become more extreme in longer-tail, more speculative tokens."

This report from ARK Investment Management provides a review of Bitcoin's performance and on-chain metrics during December 2024, and an outlook for 2025. While December saw a slight price dip for Bitcoin, ARK maintains an overall bullish view for 2025, citing historical post-halving trends, strong long-term holder behavior, and potential for economic growth driven by productivity gains and shifts in macroeconomic indicators.

Key Themes & Ideas:

1. Bitcoin Market Overview (December 2024):

• Price Dip: Bitcoin's price experienced a 3.2% drop in December, closing at $93,354, marking the first down month in over a quarter.

• Positive Indicators: Despite the dip, the price remained above key levels: the 200-day moving average, the short-term-holder (STH) cost basis, and the on-chain mean.

• Long-Term Holding Strength: 62% of the Bitcoin supply has not moved in more than a year, signaling strong long-term conviction amongst holders.

• Short-Term Overheating: Significant liquidations in the futures market suggested potential short-term market overheating.

1. Bullish Outlook for 2025:

• Post-Halving Trend: Historically, all years following a halving event have resulted in positive returns and bullish momentum for Bitcoin. The last halving occurred in 2024.

• Historical Performance: Previous post-halving years (2013, 2017, 2021) saw Bitcoin price increases of 54.1x, 14.3x, and 1.6x respectively.

• Long Term Holding Behavior: A high percentage of bitcoin remains dormant across multiple year timeframes demonstrating faith in its long term potential.
• Volatility: Bitcoin's recent volatility spike is not considered out of the norm historically, suggesting further market expansion is possible.

1. On-Chain Metrics:

• Network Security: Mining difficulty is up 52.4% year-over-year, indicating a strong and secure network.

• Miner Revenue: Remains stable at $44.3 million, but is down 8.2% year over year, a neutral signal.

• Network Usage: Both active owners and transaction volume are down on a monthly and yearly basis which is considered bearish.

• Holder Behavior: While long-term holder supply is down, the amount of illiquid (locked) supply is up. Also, Time-Weighted Turnover is up by a significant amount which signals overall bullish sentiment.
• Cost Bases: Both the market cost basis and short-term holder cost basis are up by a significant amount which are bullish signals for the asset.
• Market Sentiment: Both Perpetual and Expirational futures basis are deemed bullish.

1. Macroeconomic Factors & Economic Growth:

• Metals-Gold Ratio: The metals-to-gold ratio has hit a historical low, signaling potential for lower interest rates or higher metals prices.

• Small Business Optimism: Small business optimism has increased significantly after the election, a positive sign for the economy.

• AI-Driven Productivity: The report suggests AI adoption could boost productivity and lead to significant growth in Real GDP.

• Correlation with Real GDP: Historically, productivity has been highly correlated with real GDP growth, particularly in times of new technology adoption.
• Discrepancies in Metals Ratio: The metals to gold ratio has become disconnected from the 10-year treasury yield, which could mean a correction is coming, to either the treasury or to the metals ratio, or a combination of both.

1. News of the Month:

• Several significant news items occurred in December 2024, including:
• MARA proposes a $700 million convertible note offering to buy more Bitcoin.
• Trump selects Paul Atkins as the next SEC chair.
• Trump appoints David Sacks as AI and Crypto Czar.
• El Salvador to change Bitcoin law as part of a new IMF deal.
• Ripple secures NYDFS approval for its RLUSD stablecoin.
• Texas House introduces a bill to establish a strategic bitcoin reserve.
• MicroStrategy to join the Nasdaq 100 and heavily traded QQQ ETF.

1. Bitcoin as an Inflation Hedge & Store of Value

• Bitcoin's Performance vs. the US Dollar: One source notes that Bitcoin's compound inflation of 7% since 2020 has been significantly offset by a 900% gain while the US Dollar declined by 20% in the same period. This highlights a crucial point in Bitcoin's narrative that it is performing well against fiat currencies experiencing inflation.
• Divergence from the Dollar: Bitcoin's resilience against the fluctuating U.S. Dollar Index (DXY) is also highlighted, suggesting a growing independence from dollar fluctuations. It was noted that: "While nominal price shifts capture headlines, the real intrigue lies in how Bitcoin's purchasing power, once tightly linked with a weakened dollar, has charted a different course amid recent dollar rallies."

2. Market Dynamics & Trading Behavior

• Retail Trader Influence: A significant finding is that "86% of Bitcoin’s sell-off driven by short-term retail traders." This highlights how vulnerable the market can be to the actions of this cohort and implies that price volatility could be driven by short-term trading sentiment.
• Liquidity Squeeze: Bitcoin's sell-side liquidity has hit its lowest level since 2018, which is described as "fueling BTC rally." This implies that a limited amount of Bitcoin being offered for sale is putting upward pressure on prices, although this article is six days old at time of writing.
• Market Sentiment and Liquidations: Bitcoin's sharp price swings are noted as resulting in "$418 million in liquidations" within a single week. The volatility of Bitcoin is therefore emphasized as a significant risk to short term speculators.
• Bitcoin ETF Activity: Spot Bitcoin ETFs are highlighted as reaching their first anniversary, with some ranking in the Top 20 in terms of Assets Under Management.
• Inflows to crypto assets: Crypto investment products are seeing inflows with Bitcoin and XRP leading with a modest $48 million inflow. This shows there is investment into the crypto space as a whole, although it is modest.

3. Regulatory & Institutional Developments

• DOJ Sells Bitcoin Seized from Silk Road: The Department of Justice received court approval to sell 69,370 BTC seized from the Silk Road marketplace. The actions of the DOJ show that governments are actively engaged in dealing with cases relating to Bitcoin and other cryptocurrencies and that the market has the capacity to handle the offloading of large amounts of Bitcoin.
• Bitcoin Mining in Russia: There's a reported surge in Bitcoin mining demand in Russia, with a tripling of demand due to "regulatory shifts and price rally."
• Strategic Reserves: New Hampshire is cited as an example of states exploring Bitcoin as a strategic reserve asset.
• UK regulatory clarification: Ethereum and Solana staking are no longer classified as collective investment schemes in the UK, as part of the government's recent plans to foster crypto innovation. This shows there are some positive regulatory developments in some jurisdictions.

4. Technological Advancements & Development

• Alpen Labs' Strata: Alpen Labs is developing "Strata," which is open to public testing next month, and allows developers to build new applications on the Bitcoin network. This shows that Bitcoin is continuing to develop as a platform.
• Oh raises $4.5 million: Oh raised $4.5 million to empower creators through AI and Web3 fusion. This demonstrates the integration of AI, Web3, and new use cases for cryptocurrencies, although this is focused around the Solana network.

5. Bitcoin Network Fundamentals

• Mining Difficulty: Bitcoin's mining difficulty has reached a historic high of 110 trillion, after eight consecutive increases, showing more competition in mining.
• Adjusted Price: Bitcoin is said to remain above $100,000 when adjusted to 2021 US Dollar values.

Market Trends & Predictions - Early 2025

The crypto market is currently experiencing a period of high volatility and significant activity, as 2025 begins. While some analysts predict continued growth and even a Bitcoin price target of $200,000 by year's end, macroeconomic concerns and policy uncertainties are also creating potential headwinds. The upcoming inauguration of Donald Trump is seen as a potentially significant market driver, but the market is simultaneously showing signs of concern about persistent inflation. There's a clear trend toward institutional adoption and the development of sophisticated investment vehicles (like ETFs), but also potential risks related to debt and over-leveraging. The sources suggest a complex and dynamic landscape with a number of cross currents and competing forces.

Key Themes and Ideas:

1. Bitcoin Price Predictions & Targets:

• $200,000 Target: Bernstein analysts have reiterated their $200,000 Bitcoin price target by the end of 2025. This is driven by expected corporate and institutional demand. "A national bitcoin reserve announcement by the U.S. would spark a global sovereign race to acquire bitcoin amongst nation-states."
• Arthur Hayes' Prediction: Hayes predicts a market peak by mid-to-late March 2025, driven by dollar liquidity. He expects liquidity to recover in Q3.
• $100,000 Psychological Barrier: Bitcoin is approaching the $100,000 mark, viewed as a critical psychological milestone.
• Market Top in April: Hayes has predicted that the market will hit a top in April.
• Trump Influence: The market is anticipating the inauguration of Donald Trump, who has expressed interest in a national Bitcoin reserve and is seen as potentially positive for crypto.

1. Institutional & Corporate Adoption:

• Corporate Treasury Adoption: Bernstein anticipates over $50 billion in corporate treasury inflows into Bitcoin in 2025, compared to $24 billion in 2024. "As corporate treasuries and Bitcoin ETFs become a larger part of bitcoin ownership, we expect bitcoin ownership to get more sticky."
• MicroStrategy as Leader: MicroStrategy is expected to continue leading the charge in corporate Bitcoin accumulation. The company recently bought another 1,070 BTC, reaching a total of 447,470 BTC.
• Bitcoin ETFs: Spot Bitcoin ETF net inflows are expected to exceed $70 billion. These are seen as key to expanding institutional access. Fidelity believes Bitcoin is at the precipice of mass adoption, saying that it's not 'too late' for investors to get in.
• Options Growth: Nasdaq is proposing to raise the options contract limit for the iShares Bitcoin Trust ETF (IBIT), citing increased trading volume as the driver. IBIT options saw over $446 million in trading volume in their first hours.
• Downside Protection: Calamos is introducing a Bitcoin ETF with 100% downside protection, targeting investors wary of volatility.

1. Macroeconomic Factors & Volatility:

• Inflation Concerns: persistent inflation, leading to dips in Bitcoin and other cryptocurrencies. "Not just crypto, but both the NASDAQ and S&P 500 fell more than 1% yesterday, driven by concerns over inflation after ISM data revealed faster-than-expected growth in the U.S. economy."
• Federal Reserve Influence: The Federal Reserve's monetary policy decisions are significant market drivers. The market reacted negatively when the Fed reduced planned 2025 rate cuts from four to two.
• Market Correction: The crypto market saw a correction in late December, wiping out $500 billion in market value, after reaching a record high of $3.91 trillion, and a surge in bond yields is leading to fears of persistent inflation.
• Treasury Yields: The 10-year Treasury has reached its highest level since April, adding to inflation fears and market instability.

1. Bitcoin Dominance:

• Growing Dominance: Bitcoin's dominance among global assets has increased, despite the market correction in December. Bitcoin is positioned as the seventh largest global asset by market capitalization.

2025 features a dynamic and rapidly evolving Bitcoin landscape in early 2025. Key themes include a resurgence in on-chain transaction volume, record-breaking hashrate figures, increasing institutional involvement and lending practices, potential political influence from the upcoming Trump administration, and ongoing legal challenges and tax compliance issues. Bitcoin's market position appears to be strengthening, with increased mainstream adoption and recognition.

Key Themes and Ideas:

1. Resurgence in Bitcoin Network Activity:

• Significant Transaction Volume: In 2024, the Bitcoin network settled over $19 trillion in transactions, more than double the $8.7 trillion settled in 2023. This reverses the decline seen in 2022 and 2023, showing renewed activity on the network.
• Medium of Exchange: As Pierre Rochard stated: "The Bitcoin network finalized more than $19 trillion worth of BTC transactions in 2024, decisively proving that Bitcoin is both a store of value and a medium of exchange."
• Historical Peak: While 2024 was a significant year of growth, the peak of transaction volume was in 2021 at approximately $47 trillion.
• Market Cap Growth: Bitcoin surpassed silver's market cap in 2024, achieving a market cap of approximately $1.9 trillion.

1. Bitcoin Hashrate and Mining Landscape:

• Record Hashrate: The Bitcoin network's hashrate hit a new all-time high of 1,000 exahashes per second (EH/s) in early 2025 before falling back to 775 EH/s.
• US Mining Dominance: US-based mining pools accounted for over 40% of the global hashrate in 2024, with Foundry USA and MARA Pool controlling over 38.5% of all blocks mined in 2024. However, China-based pools still control a majority of the hashrate on the network.
• Geographic Obfuscation: The pseudonymous and distributed nature of Bitcoin mining, along with the use of VPNs, make it difficult to establish a clear gauge of hashrate dominance.

1. Institutional Lending and Yield Generation:

• MARA Lending: Bitcoin mining firm MARA has lent out 7,377 BTC, approximately 16% of its reserves, to third parties to generate yield.
• "Modest Single-Digit Yield": According to MARA's Director of Investor Relations, the company is generating a "modest single-digit yield" from these loans. This is an attempt to "offset operating expenses".
• Risk Awareness: The article notes past collapses of Bitcoin lenders, like BlockFi, Genesis, and Celsius during the 2022 bear market, highlighting the counterparty risks involved.
• MARA Holdings: MARA mined 9,457 BTC and acquired 22,065 BTC at an average price of $87,205 in 2024 and held 44,893 BTC worth approximately $4.4 billion as of December 31, 2024.

1. Political Influence and Trump Administration:

• Mar-a-Lago Meeting: Michael Saylor, Executive Chairman of MicroStrategy, met with Eric Trump, son of President-elect Donald Trump, at Mar-a-Lago. The meeting has led to speculation about Saylor's involvement in future Bitcoin policies.
• Pro-Bitcoin Stance: Eric Trump has praised Bitcoin as a "global asset" and says his family is pro-crypto. He has also stated his father is "the most pro-crypto president in U.S. history" and believes "America is going to lead the way in the digital revolution." He claims to have “fallen in love with crypto and DeFi” and is committed to making DeFi more accessible
• MicroStrategy's Position: MicroStrategy holds 446,400 BTC, worth approximately $43.7 billion, making it a major player in the Bitcoin market.
• Saylor's View: Michael Saylor has said that "Bitcoin is on the menu at Mar-a-Lago" and has expressed his willingness to advise the Trump administration on Bitcoin policies.
• Potential Regulatory Shift: There's optimism within the Bitcoin community that the Trump administration will foster a more regulatory-friendly environment for the industry.

1. Growing Institutional and Sovereign Interest in Bitcoin:

• National Reserves: Several sources point to a growing interest in nations holding Bitcoin as part of their national reserves, similar to gold.

• A future where Bitcoin becomes a strategic reserve for Switzerland could soon become reality."
• Ryan from Stratus argues for a US Strategic Bitcoin Reserve (SBR) to "diversify, not replace, existing reserves." They propose the SBR should be treated as a key resource, like gold or oil, and note the US already holds ~1% of the total Bitcoin supply through seizures.
• Geopolitical Drivers: Several sources note that politicians are considering Bitcoin inclusion in strategic reserves, particularly in light of Donald Trump's pro-crypto stance and a perceived trend of "de-dollarization" away from US dollar dominance.

• Ryan from Stratus argues that the US could demonstrate "democratizing finance through inclusion, neutrality and transparency is more important than imposing dollar hegemony."

• Central Bank Purchases: As noted by the VanEck CEO, foreign central bank purchasing and a shift away from the USD are major drivers of the gold bull market.

2. Bitcoin as a Hedge and Store of Value:

• Inflation Hedge: Bitcoin, with its fixed supply, is highlighted as a "hedge against currency devaluation."
• Store of Value: "Bull markets in gold and Bitcoin are supported by inflationary pressures, fiscal uncertainty, and de-dollarization trends," and argues that these are "essential for any portfolio seeking to guard against inflation."
• Insurance Against Systemic Risk: Multiple sources describe Bitcoin as monetary insurance and a hedge against systemic risk. Ryan from Stratus notes that it is an "escape hatch" against systemic risks, inflation, and debt instability.
• Long-Term Wealth Preservation: VanEck notes that Bitcoin is in a 3-year bull market cycle following the halving event, further positioning it as a "pivotal asset for long-term wealth preservation."

3. Technological and Philosophical Arguments for Bitcoin:

• Decentralization and Censorship Resistance: Ryan from Stratus emphasizes that Bitcoin’s "permissionless, decentralized, global peer-to-peer (P2P)" network provides security and "censorship resistance." The "Bitcoin transactions are immutable" due to the decentralized nature of the network.

• Adam Smith and Bitcoin: The Stone Ridge letter argues that Bitcoin represents a better alternative and a return to the principles espoused by Smith. They also say that they view bitcoin as "digital property. We finally have liquid land."
• Time as the Key Driver: Fiat currency allows central banks to "steal time" by printing money, whereas Bitcoin has a fixed pace ("block height") of "depletion of the most valuable resource in the universe, our time".
• Bitcoin as a New Universal Constant: The Stone Ridge letter frames Bitcoin's pace of block generation ("b") as a "new universal constant" that is "dependent on no one, measurable by anyone, the answer never changing."

4. Other Key Developments & Insights:

• FDIC Letters: Coinbase has released unredacted FDIC letters, which CryptoSlate notes, "urging banks to avoid offering basic Bitcoin services." This highlights continued institutional resistance to Bitcoin from some traditional finance players.

• Bitcoin-Collateralized Loans: Stone Ridge anticipates the emergence of a "cheap" bitcoin-collateralized fiat lending market ("HODL loans"). They believe this would "increase the utility of our stack" and "accelerate fiat debasement."
• "HODL" Philosophy: Stone Ridge also discusses the "HODL" mentality, noting that while many claim to never sell Bitcoin, that at some point most will and it will enable them to live better lives. They recommend that HODLers should seek a "cheap" way to access fiat (through loans) rather than selling their Bitcoin.

• Bitcoin Price Predictions: VanEck CEO projects Bitcoin to reach $150,000 to $170,000 during this bull cycle. MARA CEO Fred Thiel predicts $200,000 by the end of 2025.

Conversation about U.S. Major Jason Lowery's "Softwar," exploring the potential of Bitcoin as a revolutionary approach to cybersecurity and a novel form of power projection in the digital age.

Core Argument:

Lowery argues that Bitcoin is not just a monetary protocol but an emerging cyber power projection tactic. Unlike traditional software which logically constrains computers, Bitcoin physically constrains them, imposing real-world energy costs (measured in watts) on malicious actors. This, he posits, could reshape how society secures valuable digital resources.

Key Concepts & Themes:

• Power Projection Theory: Lowery draws parallels between biological organisms and nation-states, emphasizing the universal drive for survival and resource control. He argues that physical power, manifested as watts, serves as a fundamental basis for resolving disputes and establishing dominance hierarchies in both natural and social systems.
• Life's War Against Entropy: The thesis explores the fundamental struggle of living organisms against entropy, highlighting the importance of resource acquisition and efficient energy utilization for survival. Bitcoin, in this context, represents a novel way to secure resources (information) in the digital realm through the expenditure of physical energy.
• Primordial Economics: Lowery introduces the concept of "Benefit-to-Cost Ratio of Attack" (BCRa) as a metric for assessing the vulnerability of resources. He argues that organisms and societies strive to maximize their BCRa by minimizing attack costs and maximizing benefits from resource ownership. Bitcoin, through its proof-of-work mechanism, creates a system where securing information requires significant energy expenditure, thereby raising the BCRa and deterring attacks.
• Dysfunctions of Abstract Power: While acknowledging the utility of abstract power structures like governments, Lowery critiques their susceptibility to corruption and manipulation.
• Bitcoin as a Planetary-Scale Computer: Lowery proposes that Bitcoin could function as the operating system of a planetary-scale computer, utilizing the global electric power grid as its infrastructure. This concept aligns with the idea of planetary-scale computation, which explores the potential of interconnected technologies to create a global computational network.
• Physically Constrained & Thermodynamically Restricted Space: Lowery highlights the unique characteristic of Bitcoin as creating a new type of state space in cyberspace. This space is physically constrained by energy requirements and thermodynamically restricted by the fixed supply of Bitcoin, offering distinct advantages for security and resilience.
• Softwar & Mutually Assured Preservation: Lowery introduces the concept of "softwar" as a non-kinetic form of power competition. He argues that Bitcoin, through its energy-intensive nature, could deter large-scale cyberattacks and foster a state of mutually assured preservation, similar to the concept of mutually assured destruction in nuclear warfare.

Supporting Arguments & Examples:

• Historical Parallels: Lowery draws upon historical examples, ranging from ancient empires to the development of nuclear weapons, to illustrate the evolution of power projection tactics and the persistent drive for dominance.
• Evolution of Computing: The thesis traces the history of computing, emphasizing the shift from physical to abstract power structures in managing computer systems.
• El Salvador's Bitcoin Adoption: Lowery points to El Salvador's adoption of Bitcoin as a national currency as an early example of nation-state recognition of Bitcoin's potential for financial independence and cybersecurity.
• Gabriel's Horn Paradox: Lowery uses the Gabriel's Horn Paradox, a mathematical concept involving infinite surface area but finite volume, to illustrate how Bitcoin can accommodate an unlimited amount of physical power expenditure while maintaining a fixed supply of "bitpower."