Trakx Weekly Update: February 3

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset markets continued to be quite lively over the preceding seven days as evidenced by the 12.5% correction in our benchmark Top10 Crypto CTI. As is typically the case during bouts of generalized weakness in crypto prices, triggered in this instance by worries about a possible global trade war following Trump’s imposition of tariffs on China, Canada and Mexico, our best performing index was the defensive Inflation Hedge CTI, which gained 1.4%. In fact, it was the only crypto index to stay in the green last week, with the next best performer, the volatility capped Bitcoin Control 15, slipping 1.6%. That said, the weakest performer overall was the AI CTI. It slumped 33% as the newly unveiled Deep Seek AI assistant hit investor sentiment across the entire spectrum of AI-related assets.

Deep Seek Freak… Out

For those of us conditioned to the wild price gyrations witnessed in the world of magic internet money (aka crypto) such price action is hardly shocking, but spare a thought for those poor investors who own Nvidia stock. Deep Seek’s revelation that its latest open source models were supposedly trained on less than cutting edge GPUs, and on a budget of only $6mn, sent the share price of the third largest member of the SP500 down by 13%! This is not how the share price of mega cap companies in stable first world countries are supposed to behave. This equated to a loss of $465bn, which is not only the largest ever single day drop ever witnessed but to put it into context it exceeds the combined market cap of XRP, Tether and Solana – three of the largest cryptocurrencies. Moves such as these greatly undermine the blasé dismissals of crypto being an unsuitable investment vehicle because of its high price volatility.

Sovereign Bitcoin Adoption

Moving away from AI-related news, as we outlined in our 2025 Crypto Outlook, one of the three key trends we expect to impact digital asset markets this year is nation-state adoption of crypto by at least one major player. Much of the focus has obviously been directed towards the US, given Trump recently established a working group to look into the creation of a strategic digital currency reserve. However, the US is not alone in exploring such possibilities. Last week the board of the Czech central bank (CNB) agreed it would examine the case for expanding its foreign exchange reserves to other asset classes including crypto. The decision comes after CNB Governor, Ales Michl, put forward a proposal to allocate up to 5% (some $7bn) of its reserves in Bitcoin.

However, not all European central bankers are warming to crypto. Christine Legarde, Governor of the ECB – an institution with a strong anti-Bitcoin track record – said she is quite confident none of the central banks within her organisation’s Governing Council would add Bitcoin or other cryptocurrencies to their list of eligible reserve assets. Her rationale was based on the notion that reserves have to be “liquid, secure, safe… and above suspicion of being used in money laundering or other criminal activities”, which in her thinking rules out crypto. Of course, not only is such thinking outdated it purposefully ignores the fact that the overwhelming majority of money laundering that occurs in the world – estimated by the UN to be as much as EUR 2tr per annum – is in fiat not crypto.

Crypto Chokehold Relaxed

Finally, on a more positive note, Fed Chair Jerome Powell, speaking during last week’s post FOMC meeting press conference, stated US commercial banks are “perfectly able to serve crypto customers, as long as they understand and can manage the risks.” Such comments represent a marked change in tone from those deployed by the previous Biden administration who were accused by some within the industry – notably Nic Carter of Castle Island Ventures and Marc Andreessen of a16z – of conducting a targeted campaign, nicknamed Operation Choke Point 2.0, to debank crypto companies.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin Slumps to Near $94K as Asia Traders Ponder Over Trump’s Trade War: CoinDesk
• Nvidia’s single-day $465B loss surpasses combined market caps of XRP, Tether and Solana: CryptoSlate
• ECB’s Lagarde slaps down Czech proposal for bitcoin reserves: Reuters
• No More Debanking? Fed Chair Says US Banks ‘Perfectly Able’ to Serve Crypto Customers: Decrypt
• Former SEC Chair and crypto antagonist Gary Gensler returns to MIT: The Block
• Litecoin price surges on rumors of potential ETF approval: CryptoSlate

Trakx News

• We are launching a series of webinars exclusively dedicated to CGPs, and the first one will take place on February 6th. To register, click here.
• Ryan Shea published the January crypto monthly update Crypto Top Trumps examining how digital asset markets moved following Trump’s return to the White House.

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.

Trakx is a global fintech company creating new standards for digital asset investments. Through our trading platform, we offer thematic Crypto Tradable Indices (CTIs) and customised solutions, providing sophisticated investors with a high degree of compliance, custody and liquidity.

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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.