Trakx Weekly Update:Crypto Carnage On Surging AI Fears

Key Crypto Market Figures

CTIs Weekly Performance

It was another brutal week for digital assets. Market leader Bitcoin suffered a record one-day loss last Thursday, with $200 billion wiped off its market capitalization, as sentiment in the digital asset space fell to its lowest level since the collapse of FTX (the Greed and Fear hit a low of 9). Against this backdrop, our large-cap benchmark, the Top10 Crypto CTI, dropped by almost 9%. The worst-performing index was the Gaming CTI, which declined by 16%, while the best performer was the typically defensive Inflation Hedge CTI, after it posted a 1.5% gain over the seven-day period.

AI Worries Surge

The primary catalyst for the sharp sell-off was growing concern over the disruptive impact of artificial intelligence. In our previous newsletter, we highlighted the release of Moltbot, an open-source AI coding agent that went viral in tech circles due to its ability to act autonomously. Last week brought another major development: the launch of Anthropic’s Claude Cowork, an AI agent capable of executing complex, multi-step tasks. This rapid evolution from LLM-powered chatbots to autonomous AI agents has sparked fears that such systems could “eat the lunch” of software and analytics companies. As a result, stock prices across the sector slumped. Given the strong correlation between crypto and high-tech equities, this weakness spilled over into digital asset markets.

It is increasingly clear that AI will have a profound economic impact. One of the more surreal recent developments has been the launch of interfaces that allow AI agents to “hire” humans to carry out real-world tasks the AI cannot perform itself. Hal may now be your new boss! However, the indiscriminate selling of tech-related investments appears irrational. If AI is set to be as disruptive as many believe, demand for computing power and semiconductors should remain robust. Yet chipmaker stock prices have also fallen sharply.

The negative spillover into digital assets makes even less sense. AI agents cannot hold traditional bank accounts, which must be owned by legal persons. The most obvious workaround is for them to transact via crypto wallets. A clear signal that this is the direction of travel came last week, when xAI posted a job opening for a Crypto Finance Expert to help train and refine its AI models. The role explicitly references analyzing blockchain data, modelling tokenomics, evaluating on-chain flows, exploiting inefficiencies across centralized and decentralized venues, and reasoning through novel digital asset paradigms. This strongly suggests that the integration of AI agents into the cryptocurrency ecosystem will significantly boost demand for blockchain services, stablecoins, and decentralized infrastructure, which is at odds with recent price action.

Buterin Pivots On L2s

Ethereum co-founder Vitalik Buterin surprised market participants last week by questioning the current role of Layer 2 blockchains within the Ethereum ecosystem. Layer 2s were originally designed to help Ethereum scale by moving most transactions off the Layer 1 mainnet, bundling them together, and posting compressed proofs back to Ethereum. This approach was meant to preserve Ethereum’s security guarantees while dramatically increasing throughput and lowering fees. However, according to Buterin, progress on Ethereum’s rollup-based Layer 2 roadmap has been far slower and more difficult than originally expected. At the same time, Ethereum’s Layer 1 has begun scaling more effectively on its own, supported by planned increases to the gas limit and the introduction of native rollups, changes that allow more transactions per block and improve efficiency directly on the mainnet.

This creates a challenge for existing Layer 2 networks such as Base and Arbitrum, which collectively secure billions of dollars in total value locked (TVL). Rather than advocating for their demise, Buterin has suggested a strategic pivot. Layer 2s should evolve beyond pure scaling solutions and focus on value-added services such as enhanced privacy, ultra-fast confirmations, or even non-financial use cases.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin hits lowest level since 2024 and stocks stumble as AI and geopolitical nerves fray: CNN
• Crypto sentiment gauge hits FTX-era lows as ‘extreme fear’ reaches a 9 reading: CoinDesk
• Elon Musk’s xAI is hiring crypto specialists to train its AI models: CoinDesk
• Vitalik Buterin reevaluates Ethereum’s rollup-centric roadmap, arguing L2s decentralized ‘far slower’ while base layer advanced: The Block
• Crypto Treasuries Fall Deeply Underwater as Bitcoin, Ethereum and Solana Dive: Decrypt
• Crypto Bros Nauseated After Realizing Bitcoin Itself Was Funded by Jeffrey Epstein: YahooFinance

Trakx News

• Trakx CTIs are now live on Canton, making index strategies portable, transparent, and easier to plug into institutional workflows. Most crypto index products still stay locked inside single platforms, but Trakx CTIs on Canton can now be issued, transferred on-chain, and redeemed within the same ecosystem.
• After attending the Digital Assets Forum in London last week, Lionel Rebibo is back in Paris for the 50 Partners Onchain Day 2026 (February 10). If you’re attending (or in town for any of the other events) and want to discuss CTI strategies on Canton or potential collaboration opportunities, please get in touch.

Trakx CTIs Performance

Sources: Coingecko and AlphaVantage

*Return of bitcoin is calculated since 01/05/2020, while CTIs performances were calculated since their respective launch date.
**Includes simulated performance.
***The risk signal is determined according to the historical volatility level, the higher the riskier.

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Disclaimers: No Investment Advice. Index returns and statistics are for illustration only. Index returns do not reflect any transaction costs or expenses. Past performance does not guarantee future results. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the newsletter content as such. Trakx.io does not recommend that any cryptocurrency should be bought, sold, or held by you. Readers shall conduct their own due diligence and consult their financial advisors before making any investment decisions.