Central Banker's Bitcoins and Deepseek Disruption

Saylor is on Forbes and the Czechs are thinking about bidding. Life is good.

January 31, 2025

Thankfully, this week was somewhat quieter relative to previous ones. I needed some respite.

This Week in Crypto

Starting with ETF flows:

Farside investors

Nothing really to write home about here, but the consistent bid is a key reason we’re not seeing as much volatility to the downside as in previous cycles. January alone as seen around $5B in net inflows. That’s around 50,000 BTC a month, or 600,000 BTC a year, from the Bitcoin ETF industrial complex alone. As a reminder, there are currently only 164,000 new Bitcoins each year. I’ll let you do the math.

One of our start-of-year predictions was that two new nation-states would be revealed to be buying, not just holding, Bitcoin. Czech out the early signs:

Amusingly, the ECB President came out with damage control later in the week; “I had a good conversation with my colleague from the Czech Republic … {and} I’m confident that he’s convinced, as we all are, of the necessity to have liquid, secure and safe reserves.” Ironically, those are three of the first words I’d use to describe Bitcoin.

Frankly, I couldn’t imagine a more bullish indicator than the European’s fading Bitcoin. This will be an amusing clip to watch back at the turn of the decade. Remember, if you are not long Bitcoin, you are short Bitcoin. The Central Banks are coming - when, not if.

Saylor is up to his usual shenanigans, he probably bought more Bitcoin this week (I didn’t even bother checking), and he’s launching a new preferred stock instrument $STRK, which he just announced he is increasing the size of from $250M to $584M after huge initial demand. A handy explainer video on this instrument can be found here. The real highlight for me though was his feature on the cover of Forbes…

And yes, there is some absolutely vintage Michael Saylor in it:

“They’re living in flatland, a pre-Copernican world. We’re on a train going 60 miles an hour, spinning a gyro with a 30-ton weight on it, and the rest of the world is standing by the side of the track, stationary.”

Elsewhere, the state of “the trenches” on-chain have been dire this week, with trader sentiment at nearly at all time lows following memecoin’s and AI coins nuking. Despite this price action for majors has held well - if you are as terminally online as me - remember that X is not real life.

And finally, some headlines:

This Week in TradFi

Major stock indexes in the U.S. rose yesterday, with investors reacting to earnings reports and economic news. 

  • The Dow and S&P closed 0.4% and 0.5% higher, respectively, and the tech-heavy Nasdaq closed 0.3% higher yesterday.

  • This was coming after a slight down session on Wednesday, after the Fed decided to leave the interest rate unchanged. Although, we’re not sure who was really expecting the Fed to not do that.

  • IBM shares rose 12% yesterday, with the company reporting a massive increase in its generative AI business in Q4. Meta increased 1.6% after reporting better-than-expected growth. And Microsoft dropped 6.2% after Q2 Intelligent Cloud revenue missed expectations. Everyone’s favorite Nvidia spent most of the day in the red, but finished up 0.8%.

  • The first reading on Q4 U.S. economic growth and weekly jobless claims came in slightly below expectations, but nothing to be too worried about. The Fed maintains that the labor market is on solid ground, though inflation continues to be slightly elevated. 

  • The 10-year Treasury yield fell slightly, ending yesterday at 4.52%. 

On the international front:

  • Seems like in 2025, the central banks won’t all be aligned like they were last year. The U.S. is holding interest rates steady, while the euro zone is looking to cut rates, and Japan continues to increase them. 

  • Germany’s unemployment rate rose again at the beginning of the year, despite seeing a smaller than expected increase in the number of people out of work. Germany is Europe’s biggest economy, and its sluggish labor market is increasing concern for more than just its own citizens. 

  • Oil prices seem relatively steady today but are on course for weekly declines, as markets wait to see if President Trump will follow through on his tariff threats to Mexico and Canada.

  • Japan is expected to report its first YoY increase in household spending in five months, though the rise is expected to be slight. Core inflation in the country hit 2.5%, the fastest annual pace in nearly a year, and much higher than the central bank’s 2% target. This follows the Bank of Japan’s decision last week to raise interest rates to 0.5%, the country’s highest rate since 2008, though still much lower than many other countries. 

This Week in Tech

If you don’t already know what we’re writing about this week, this newsletter probably isn't for you. Just kidding, please don’t unsubscribe.

Anyone who’s anyone in the tech world is talking about Chinese AI lab DeepSeek, which released open-source versions of AI models that are competing (and maybe even better than?) everything OpenAI, Meta, Google, and others have offered thus far. 

  • DeepSeek claims to have built its models much more efficiently than OpenAI and at a fraction of the cost (apparently just $5.6M). Because of that, they’re able to offer their R1 model largely for free, and the chatbot has shot to the top of global app stores. 

  • OpenAI has challenged this, claiming that DeepSeek was trained on its model.

  • One of DeepSeek’s innovations is what they call pure reinforcement learning, which is about letting the model go through a trial-and-error approach on its own. 

  • So far, it looks like R1 may be able to match or beat OpenAI’s o1 on many AI benchmarks. This could push the U.S. to invest even further in AI, with the fear that we’re no longer at the forefront of the AI race. 

  • Some U.S. tech companies are hooked, with R1 now available through both Microsoft and AWS.

    • Intel’s former CEO Paul Gelsinger, who is now working on a new startup Gloo, said Gloo has already decided not to pay for OpenAI and is instead using R1. He tweeted about how thrilled he was with the development, and that he hopes DeepSeek will “help reset the increasingly closed world of foundational AI model work”. 

    • Others are less impressed. Mark Zuckerberg announced that Meta would continue to invest in data centers and believes that the ability to “build out that kind of infrastructure is going to be a major advantage”. He continues to stand by his goal of making Llama 4 the leading model in the market. 

    • Dario Amodei, CEO of Anthropic, made the case for stronger export controls in order to slow the progress of Chinese companies like DeepSeek. He believes DeepSeek falls short when compared to AI models out of the U.S., but still wants Trump to strengthen export rules and prevent China from obtaining chips. 

  • R1 does have its limitations, though. NewsGuard found that R1 provides inaccurate answers 83% of the time, and another test found that R1 refuses to answer 85% of prompts about China. 

  • Regardless, DeepSeek has made massive waves in the tech community. And one thing’s clear, we’re still just at the beginning of a very, very long journey. 

As usual, below are some fundraising announcements, M&A, and tech personnel changes that caught our eye:

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