Market Bounces Back

GM Anon!

The FOMC meeting has come and gone, and as expected, no rate cuts were announced. Markets reacted with a small pump, but nothing significant. Sentiment remains cautious, with most assets struggling to gain real momentum. While some were hoping for a stronger bullish response, the reality is that liquidity conditions haven’t shifted enough just yet.

Meanwhile, gold hit an all-time high, reinforcing the broader macro trend of capital seeking safe-haven assets. With global uncertainty still looming, this move could be a signal of what’s to come for BTC and other risk assets in the months ahead.

Elsewhere, AI drama is brewing. China’s new LLM, DeepSeek, is making waves, reportedly rivaling top Western models at a fraction of the cost. If these claims hold, it could shake up the AI sector, potentially impacting tech stocks and, by extension, crypto markets.

Now, let’s dive into the crypto stuff. 🚀

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TLDR

• Markets reacted mildly to the FOMC meeting, with no rate cuts announced. Liquidity remains tight, keeping sentiment cautious.

• Gold hit an all-time high, signaling strong demand for safe-haven assets amid macro uncertainty.

• M2 money supply is nearing record levels, a historically bullish signal for BTC and other risk assets.

• BTC dominance has climbed past 57%, mirroring past cycles where it peaked before altcoins took off.

• Short-term BTC metrics show cooling off, with MVRV and SOPR coming down, indicating profit-taking but no major signs of distress.

• Perpetual futures funding rates have dropped, suggesting reduced leverage and a healthier market structure.

• Ethereum inflows have turned positive, showing renewed confidence after months of bearish sentiment.

• Raydium surpassed Uniswap in DEX volume, with over $115B traded in January, highlighting Solana’s growing dominance.

• AI agents took a hit, with market cap dropping to $10B on DeepSeek fears, while RWA and DeFi narratives gained momentum.

• Pump.fun hit $15M in daily revenue, with memecoin trading on Solana continuing to surge.

State Of Market 

Markets & M2

Both crypto and traditional finance markets took a hit this week, with the AI sector feeling the brunt of the impact. 

NVIDIA ($NVDA) just saw an incredible $600B wiped from its market cap, making it the biggest single-day loss in U.S. history. This was a major part of the $787B that vanished from the U.S. stock market—a tough day across the board for investors. This was primarily all blamed on Deepseek, but it was likely a combination of factors, as it always is. 

Over and above this, global liquidity has pulled back, leaving many investors holding their breath for a reversal—this will likely be the key catalyst for the next leg up. 

There’s growing concern that this could mark the end of the bull market as we’ve known it, but we highly doubt it, especially given the current administration in the US. They’ll likely inject liquidity; it’s just a matter of time.

The rising M2 money supply, now approaching its all-time high of $22T, is a bullish signal for BTC and other risk assets. Historically, expansions in M2 liquidity have preceded major BTC rallies, as excess capital often flows into speculative markets first.

Despite the FED's tightening efforts, M2 has continued to grow, setting new monthly highs since early 2024. This suggests that while the Fed maintains high rates, liquidity is still entering the system, providing fuel for BTC’s next potential leg up.

BTC Metrics

BTC dominance is on the rise again, climbing past 57% in January 2025 after bottoming out at around 54% in December 2024. This trend mirrors the 2020 cycle, where dominance hit a low in November before rallying to 69% by January, only to decline as the market shifted focus to riskier assets.

During the last cycle, dominance peaked near 72% just as BTC doubled its prior all-time high, hitting $40K, but still well short of the eventual $64K top. Historically, these dominance shifts have signaled key changes in market sentiment and risk appetite.

Retail BTC holdings have been steadily declining, while large investors are accumulating, signaling a shift in market control. As BTC's price trends upward, institutions seem to be positioning for long-term gains while retail investors exit.

The Short-Term Holder MVRV has come down from recent highs, indicating that some short-term holders have already taken profits. While it’s still elevated, it's not yet in the extreme overvaluation zone that typically signals major corrections.

This cooldown suggests that some heat has been taken out of the market, reducing the immediate risk of a sharp sell-off. However, if BTC starts pushing higher again and MVRV climbs back toward the 1.5+ standard deviation range, we could see renewed selling pressure.

The Short-Term Holder SOPR remains above 1, meaning short-term holders are still selling at a profit. However, it has come down from recent highs, suggesting that some of the exuberance is cooling off.

Historically, when SOPR remains elevated but starts to decline, it can indicate that profit-taking is slowing, which can either lead to a reset before another leg up or signal exhaustion before a correction. 

For now, this remains a healthy sign, but if we see SOPR trend downward while BTC price holds, it could indicate stronger hands absorbing sell pressure.

BTC perpetual futures funding rates have come down from recent highs, suggesting a slight cooling in leverage demand. This decline could signal that some leverage has been flushed from the system, reducing the immediate risk of a liquidation cascade.

Btc reserve risk has been climbing but remains below danger levels, suggesting that long-term holders are still confident but are starting to take some profits.

We're not yet at overheated levels, but if this trend continues, it could indicate growing distribution from strong hands. Something to watch closely as BTC approaches key resistance levels.

Overall, the market is in a cooling phase, with leverage, short-term profit-taking, and key metrics like MVRV and SOPR resetting from recent highs.

While BTC isn’t in immediate danger, signs of some distribution are emerging. If liquidity conditions remain favorable and M2 expansion continues, BTC still has room to push much higher—but expect volatility along the way. 

Lastly,

MicroStrategy has once again expanded its BTC holdings, acquiring 10,107 BTC for approximately $1.1B at an average price of $105,596 per BTC. In addition, the company has filed for a mixed securities shelf offering, indicating plans to raise further capital for additional Bitcoin purchases and broader corporate initiatives.

The scale and pace of accumulation highlight MicroStrategy’s unwavering commitment to BTC as a strategic asset.

Market Data Points 

After months of bearish sentiment weighing on the Ethereum ecosystem, on-chain activity suggests investors are cautiously re-entering. This could be an early sign of renewed confidence, potentially setting the stage for a broader recovery in the Ethereum ecosystem.

Sustained flows for Ethereum have turned positive once again and are steadily increasing.

Conor recently pointed out that the number of crypto tokens has exploded, surpassing 36.4M today, and we're on track to reach 100M by the end of 2025.

For context, the 2017–2018 "alt season" had fewer than 3,000 tokens, and the 2013–2014 cycle saw less than 500. The scale of growth in the token ecosystem is unprecedented.

Interesting to note, the year 2024 stood out as a pivotal moment for digital assets, driven by greater institutional involvement, the approval of BTC ETFs, a more supportive regulatory climate in the US, and heightened interest from retail investors. 

This surge in activity was evident in trading volumes, with centralized exchanges reaching a record $75.8T—eclipsing the $65.1T peak achieved in 2021. These figures underline the increasing integration of crypto into the mainstream financial landscape.

Lastly, DEX trading has reached a new all-time high, now accounting for 20.5% of all spot CEX volume, marking a significant shift in market dynamics as decentralized platforms continue to gain ground on their centralized counterparts.

Majors & Memes

Most major assets have been range-bound over the past week, reflecting market uncertainty. Meanwhile, AI and meme narratives have lost some momentum, while DeFi, GameFi, and RWA sectors have started gaining traction.

Tokens in the  AI agent sector saw a significant downturn, with notable declines in AIXBT, TOSHI, and GRIFFAIN. However, key players such as FARTCOIN, ZEREBRO, REKT, PUNKY, GOAT, and KAIA continued to dominate market attention. Meanwhile, other memecoins like UFD, MLG, MUSKIT, and JellyJelly surged but have since pulled back from recent highs.

Venice.ai just completed an airdrop that's making waves across the crypto space. The project, led by Erik—a well-respected OG in the industry—is generating significant buzz. Adding to the excitement, the Venice token is set to be listed on Coinbase, further solidifying its growing momentum. Keep an eye on this one. 

Solana & Pumpfun

Trading bot activity has become almost entirely concentrated on Solana, leaving other chains in the dust. The latest data shows Solana now commands 99.9% of all bot-driven volume, with Ethereum, Base, and others barely registering. 

Pump.Fun continues to show impressive growth, with over 11.6M total addresses now on the platform and more than 6.68M tokens launched. Just in the past day, 34,717 addresses have created tokens, with 48,606 new tokens hitting the market today alone. 

The platform's adoption is accelerating, as seen in the surge of daily active and new addresses, which have been climbing steadily since mid-2024. This rapid growth highlights the platform's strong appeal to memecoin creators and traders, cementing its position as a key player in the Solana ecosystem and crypto as a whole. 

Pump.fun also just hit a massive milestone, pulling in over $15M in daily revenue on January 25th. The past week has seen a staggering surge in activity, with daily volumes skyrocketing to levels never seen before. 

The platform's growth has been exponential, fueled by the ongoing memecoin frenzy and an increasing number of traders jumping in. Compared to previous months, Pump.fun's revenue has gone parabolic, cementing its dominance in the on-chain token launch space. If this momentum continues, we could see even higher records in the coming weeks.

Meteora, a new Solana-based DEX, has seen explosive growth, hitting $33B in trading volume for January. Now holding 9% of the total DEX market, it has solidified Solana’s dominance, with three of the top five DEXs running on the network. 

Raydium has surpassed Uniswap in monthly DEX volume for January, recording over $115B in total trading activity.

That wraps up this post—we hope you found the insights valuable. See you next week, anon! 🚀