The CoinEx Research Department's January 2025 report highlighted the violent market fluctuations this month, influenced by political dynamics, institutional participation, and macroeconomic factors. Bitcoin broke through $100,000 to set a new historical high, while Altcoins fell into a slump due to the capital drain caused by Tokens related to Trump. The rise of the Chinese DeepSeekAI model further disrupted the global technology and Crypto markets, leading to a revaluation. Institutional investors' adoption of Bitcoin continued to heat up, but the market pullback at the end of the month raised concerns about potential consolidation.
A Turbulent Start to 2025
Bitcoin opened the new year at around $92,500 and closed near $102,000, demonstrating resilience in a volatile macroeconomic environment. The Federal Reserve maintained interest rates between 4.25% and 4.50%, citing a still-strong labor market and persistent inflation, while the Bank of Japan raised its policy rate from 0.25% to 0.50%. The official TrumpMemecoin and the Trump-related WorldLibertyFinance (WLFI) attracted market attention, but their capital siphoning effect limited the growth of Altcoins. Under current market conditions, Bitcoin may enter a short-term consolidation phase due to the lack of immediate positive catalysts.
The Trump Effect: Meme Token Frenzy and Rapid DeFi Expansion
With Donald Trump's impending presidency, his influence in the Crypto market has significantly increased. His team issued the official TrumpMemecoin on the Solana-based Meteora platform, bypassing traditional SOL ecosystem liquidity providers like Raydium. This drove Solana's stablecoin supply to surpass $9 billion, a 130% surge, and pushed Solana's decentralized exchange (DEX) trading volume to a record high of $258 billion, triple that of Ethereum.
The speculative frenzy continued to heat up as First Lady Melania Trump suddenly launched the MelaniaToken, further boosting market trading activity. However, the consecutive Token issuances led to a depletion of market liquidity, ultimately triggering a correction. Meanwhile, the Trump-related WorldLibertyFinance (WLFI), an Ethereum-based DeFi project, successfully raised over $300 million in its pre-sale, indicating that Trump's Crypto narrative has extended beyond Meme Tokens to institutional-grade DeFi products, combining speculative and financial attributes.
DeepSeekAI Shakes the Global Markets
The Chinese DeepSeekAI model was officially released just before the Lunar New Year, shocking the global AI and financial markets. The model's training cost is far lower than Western competitors, using a Mixture of Experts (MoE) architecture to optimize computational efficiency by selectively activating the most relevant sub-networks.
The emergence of DeepSeek triggered a massive sell-off in US tech stocks, with Nvidia (NVDA) plunging 17% in a single day, as investors reassessed the AI competitive landscape. Crypto Tokens related to AI also experienced a severe downturn due to the risk-off sentiment. However, the rise of DeepSeek is not a fundamental threat to the market but rather a necessary market readjustment, which may accelerate the adoption of AI technology and bring new development opportunities to the Crypto industry.
Source: LiveBench
Institutional Bitcoin Adoption and Policy Shifts
In January, institutional participation in Bitcoin remained strong and was supported by various policy developments. The US Securities and Exchange Commission (SEC) acting chair Mark Uyeda established a dedicated Crypto currency working group, while President Trump signed an executive order in his first week, promoting Crypto innovation and signaling a broader adoption of Cryptocurrencies.
Beyond the US, sovereign institutions also increased their Bitcoin allocations. The Czech National Bank approved the inclusion of Bitcoin in its national reserves, and Norway's sovereign wealth fund reported a 150% year-over-year increase in its Bitcoin holdings, exceeding $350 million. These developments indicate growing confidence in Bitcoin as a store of value among government financial institutions and institutional investors.
Stablecoin Inflows and Cautious Market Sentiment
Stablecoin inflows remained strong, with approximately $9.9 billion flowing into the market in January, continuing the growth trend of the past three months and supporting the bullish market momentum. The record-high Bitcoin price was further bolstered by these stablecoin inflows, underscoring the importance of stablecoin liquidity to market dynamics.
However, despite the overall optimistic market trend, the significant pullback at the end of January indicates investors' cautious attitude. If stablecoin inflows slow or even turn into net outflows, the market may enter a consolidation phase, leading to increased volatility. Investors should closely monitor stablecoin capital flows as a key indicator of market sentiment.
Market Outlook for February 2025
Looking ahead to February, the market direction will be influenced by institutional dynamics, regulatory policies, and stablecoin capital flows. Traders and investors should remain vigilant, adjusting their strategies based on the macroeconomic environment and liquidity trends to navigate the market changes.
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