The current market is feeling decidedly scary. At the core of the fear this week were two new models released by OpenAI and Anthropic’s Claude. This is a really good article making the rounds explaining how the coming AI disruption is here. Now. Software is getting a massive downward rerating, and it’s dragging crypto right down with it. As @biancoresearch noted, Bitcoin is currently heavily correlated to software.
Like many who have bet heavily on software and crypto, @CathieDWood is not having a good time. She’s getting rekt, down 38% in five years while the Nasdaq has doubled. Crypto stocks in general are not doing well year-to-date:
COIN down 37% (latest earnings were terrible)
CRCL down 28%
BMNR down 27%
MSTR down 19%
NAKA is down a staggering 99.26% from July.
Meanwhile, looking at global equities, Asian stocks are crushing US stocks so far this year, while the US market is exhibiting some seriously DotCom-esque activity. That said, @McClellanOsc just put out a contrarian bottom call on the tech sector. Also, the "dollar doomers" are in shambles after Russia proposed a return to the dollar system.
@jvisserlabs pointed out a potential direct connection between software equities tanking and Bitcoin selling off. SaaS venture funds are selling their Bitcoin to cover their illiquid private allocations that are getting destroyed by AI. He says to watch for a decoupling where Bitcoin bounces while SaaS stays flat, which will signal a market structure change.
The AI theme is also throwing out some wild curveballs. For instance, in Anthropic's latest risk report, Claude was oddly supporting the use of chemical weapons and “other heinous crimes.”
Are we close to a bottom in crypto? There's a fascinating theory going around regarding why Bitcoin’s price dropped so precipitously from October 10th to February 5th. Right now, Bitcoin sentiment continues to worsen. Deutsche Bank declared that Bitcoin is no longer digital gold, prompting @EricBalchunas to openly question their logic.
It’s not looking good, but the technical indicators scream capitulation. Bitcoin’s daily RSI is at 16, a historic low we haven't seen since the COVID crash of March 2020 and the bear market depths of November 2018. Additionally, the Bitcoin mining production cost—an excellent historical bottom signal—is signaling that the bottom is within 5-10%.
@intocryptoverse also noted that BTC price historically goes below the realized price and the balanced price during each bear market. Despite this, some remain wildly optimistic; @MarkYusko is still calling for $600k BTC by 2029.
It feels like we're at the point in the cycle where projects with fundamentally good news are sold into. Case in point: BlackRock is buying UNI and deploying BUIDL on Uniswap; meanwhile, UNI is the lowest it's been since 2021.
Prediction markets and perp DEXs are about the only thing in crypto that have done well these past few months. Prediction markets are also drawing intense regulatory fire. An IDF reservist was indicted in Israel for using classified info to place bets on Polymarket. Unsurprisingly, SEC Chair Atkins is looking at prediction markets very closely. It’s easy to see why they are a perceived threat; just look at the massive volume comparison of Prediction Markets vs. Las Vegas during the Super Bowl.
Hyperliquid is outperforming Coinbase in both volume and price action. Naturally, the new narrative taking over the timeline is Coinbase vs. Hyperliquid. @KyleSamani, fresh off of leaving Multicoin, went directly after Hyperliquid.
This bear cycle has precipitated venture capital in crypto to wrestle with a severe identity crisis. @krugermacro laid out a great thread on what went wrong for crypto, with @nic_carter adding that points 3 and 6 are generally overlooked. @cdixon, @hosseeb, and @samrags_ had a great debate on gaming/media in Web3.
Instead of chasing sexy Crypto Twitter narratives, VC funding is quietly flowing into stablecoin infra, custody solutions, and RWAs. @Jamie1Coutts echoed this, stating that crypto's main bull catalysts will be RWAs and AI agents, as they are the most obvious potential drivers of throughput and fee generation. @Matt_Hougan also listed out what he sees as the big token narratives moving forward.
A recent bait post declared a large number of well-known projects (mostly L1 or L2s) were dead, only to be corrected that on-chain metrics for Aptos, Polygon, Bittensor, and others are actually pretty good for a bear market. This begs the question: Do we need another new L1? Courtesy of LayerZero, some are saying we do. @malekanoms, however, has a much more blunt take on LZ: Going to zero.
Meanwhile, after a @intocryptoverse tweet, CZ found himself defending listing tokens of questionable quality. Infighting and recriminations are definitely hallmarks of bear cycles!