Market

Weekly Market Commentary - DV Chain - January 28th, 2025

January 28, 2025

💡 Welcome back to DV Chain's Weekly Market Commentary! Last week brought major developments across both traditional and crypto markets. The AI sector was shaken by DeepSeek’s breakthrough model, sparking a sharp selloff in equities and dragging risk assets lower before a partial recovery. Meanwhile, Jupiter unveiled new initiatives like Jupnet and protocol fee buybacks, and MicroStrategy boosting its BTC holdings to over 471,000 BTC. Dive in below for insights and upcoming catalysts shaping the market:

Market Recap

  • DeepSeek, an AI startup just over a year old, came out with a breakthrough AI model that offered comparable performance to the world's best chatbots at seemingly a fraction of the cost
      • This news seemed to come out on Friday but after digesting over the weekend, equity indices opened lower, and NQ traded down to -4.5% on the session at the lows
      • $NVDA traded down $420B in market cap, and equities lost $1T in value, dragging the crypto markets down with it
      • As stocks opened for trading, risk assets recovered some losses in what seems to be an overreaction
      • Although it may be bad for Nvidia chip sales, advancement in AI should help most other companies boost productivity and produce more with less resources and cost
  • Jupiter had a conference over the weekend announcing acquisition of MoonShot, as well as 50% of protocol fees going towards buybacks, and announced Jupnet, an Omnichain network
  • Elon Musk exploring use of blockchain in government efficiency
  • MicroStrategy has acquired 10,107 BTC for ~$1.1 billion at ~$105,596 per bitcoin. As of 1/26/2025, MSTR holds 471,107 $BTC acquired for ~$30.4 billion at ~$64,511 per bitcoin
  • Trump signed a series of executive orders relating to crypto last week:
    • Create a cryptocurrency working group
    • SAB121 repealed, so banks can hold crypto on their balance sheet
    • Contemplating a national digital asset stockpile
    • US to promote growth of stablecoins worldwide, and there will be no CBDC
    • Lummis named chair of senate digital asset committee
    • Hester Pierce will lead SEC Task Force on Crypto
  • Larry Fink at Davos says he wants the SEC to rapidly approve the tokenization of Stocks and Bonds
    • Potentially next big narrative for crypto
  • Looking ahead:
    • FOMC Wednesday
    • FTX Repayments in Q1
    • Staked ETH ETF
    • Ethereum Pectra Upgrade, late Q1

Upcoming Catalysts

  • $ETH
    • ETH ETF flows have been robus since the election
    • Future flows aren't fully priced in yet, which has been the biggest driver of the cycle
    • Likely the staking ETF gets approved in Trump's term (signaled by Hester Pierce)
  • $LDO
      • DeFi as a sector is going to benefit from the shift in regulatory environment
      • LDO fundamentally is a very strong project, clipping almost $200m in fees on an annualized basis to its treasury
      • It has maintained majority of market share in the LST/LRT space, despite higher temporary yields in new competitor’s liquidity bootstrapping farms
      • From an institutional standpoint, it is much stronger than competitors in terms of safety and network effects. The Lido Dao’s roadmap prioritizes institutional adoption, which we think is an astute plan, given the recent interest in crypto and tokenization from Wall Street
      • Fee switch likely incoming
      • Consensys lawsuit thrown out
      • Lido V3
  • $JUP, Jan
    • Jupuary $700M airdrop - late January
  • $FTX creditor distributions in Q4 ‘24 - Q1 ‘25

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