A Volatile Backdrop to Start in 2025

The first month of 2025 opened at approximately $92,500 and closed at around $102,000 amid a volatile political and macro backdrop. The market was stirred by the launch of the Official Trump Memecoin, reigniting speculative enthusiasm, while Trump-linked World Liberty Finance (WLFI) successfully raised over $300 million in its presale. From a macroeconomic perspective, the Federal Reserve maintained interest rates at 4.25%–4.50%, citing a strong labor market and inflation that remained above the target rate, albeit declining. Meanwhile, the Bank of Japan raised its policy rate from 0.25% to 0.50%, as expected.

Despite Bitcoin trading above the $100,000 threshold for most of the month and making a new all time high, altcoins struggled for momentum following the Trump-related liquidity absorption. Given the current landscape, we anticipate Bitcoin might enter a near-term consolidation phase due to a lack of immediate bullish catalysts.

The Trump Effect: Official Trump Token

Once again, Donald Trump took the center stage of the crypto market. Ahead of his inauguration, his team launched the Official Trump Memecoin on Meteora, sparking a fresh speculative wave. The token’s fully diluted value (FDV) surged to over $70 billion at its high, flipping leading memecoins such as SHIB, PEPE, and WIF. A key differentiator was its Solana-first approach, opting for Meteora with USDC pairing rather than the usual Raydium or Pump.fun approach with SOL. This selection propelled Solana’s stablecoin supply to over $9 billion in the month, recording an increase of over 130%, and drove the monthly Solana DEX trading volume to an all-time high of $258 billion, a triple of Ethereum’s $86 billion for the month.

The Trump memecoin rally extended further with the unexpected launch of the Melania Token by the First Lady Melania Trump. While initially fueling additional momentum, these back-to-back token launches absorbed significant market liquidity, leading to an eventual pullback as speculative capital became exhaustive.

World Liberty Finance: Trump-Linked DeFi Play

While the Official Trump Memecoin captured the spotlight on Solana, World Liberty Finance (WLFI), the DeFi project on Ethereum linked to Trump and his sons, followed to drive investors eyes. The platform successfully raised over $300 million through its token presale. In short, the Trump-linked crypto narrative is now spanning both meme-driven speculation on Solana and institutional-style DeFi play on Ethereum.

DeepSeek Shakes Up the Global AI Landscape

The launch of DeepSeek, a Chinese AI model, on the eve of the Lunar New Year, sent shockwaves across the global AI and financial markets. Boasting unprecedented training efficiency at a fraction of the cost of its Western counterparts, DeepSeek ignited both excitement and panic. Its emergence triggered a sharp sell-off in U.S. tech stocks, with Nvidia (NVDA) plummeting 17% in a single day, as investors reassessed the competitive landscape. The crypto market was not immune, as AI-themed tokens faced heavy drawdowns in reaction to broader risk-off sentiment.

According to its publicly released paper, the model has a training cost of under $6 million, significantly lower than its western counterparts. What sets DeepSeek apart is its Mixture of Experts (MoE) architecture, which optimizes computational resources by dynamically activating only the most relevant sub-networks ("experts") per query. The LiveBench leaderboard may serve as a reference for the comparison between LLMs.

While DeepSeek’s debut coincided with a market downturn, we view this as a necessary valuation reset rather than a structural issue. In reality, DeepSeek’s cost-efficient approach could accelerate AI development and unlock new opportunities across AI-driven crypto innovations rather than hinder them.

Institutional Involvement: Regulatory Shifts & Bitcoin Adoption

Institutional capital inflow remains a key driving force for the crypto market in 2025, with significant policy developments in January. Following SEC Acting Chair Mark Uyeda launched a crypto task force, President Trump also signed an executive order in his first week promoting crypto innovation, marking a policy shift toward broader adoption. Meanwhile, Illinois advanced a bill to establish a state Bitcoin reserve, following Arizona’s lead in integrating crypto into government finance.

Outside the U.S., institutional Bitcoin adoption is also gaining momentum. The Czech Central Bank approved a proposal to include Bitcoin in its national reserves. Norway’s Sovereign Wealth Fund disclosed a 150% YoY increase in its indirect Bitcoin exposure, now exceeding $350 million.These moves highlight a growing institutional confidence in Bitcoin as a legitimate asset class within sovereign and government treasuries.

Stablecoins Maintain High Inflows, but Caution Advised

In January, stablecoins experienced a substantial inflow of approximately $9.9 billion, maintaining a high influx level for nearly three months and supporting a robust bull market structure. Concurrently, Bitcoin prices reached new all-time highs during the month. However, it is essential to note that due to macroeconomic factors, the market witnessed a significant pullback towards the end of January. The inflow and outflow trends of stablecoins in the upcoming month will be pivotal in determining the market's direction. A significant decrease in inflows or a shift towards net outflows could indicate a period of market consolidation and increased volatility in the near future. Investors and traders should closely monitor these stablecoin flow patterns to gauge the overall market sentiment and adjust their strategies accordingly.

Economic Data & Events to Watch in February 2025

Disclaimer

The content provided in this report is for illustrative purposes only and is intended to offer insights into the cryptocurrency market. It is not, and should not be interpreted as, investment advice or recommendations. The information contained herein is based on sources believed to be reliable; however, we do not guarantee its accuracy, completeness, or suitability for any purpose, and it should not be relied upon as such. Any opinions expressed reflect a judgment at the date of publication and are subject to change without notice. Readers are advised to conduct their own research and due diligence and, where appropriate, seek professional advice before making any investment decisions. The authors and publishers of this report accept no liability for any loss or damage arising from the use of the information provided.

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Monthly Outlook(2025.January)