$10B Crypto Liquidations after Tariff Tumult

The largest liquidation event in crypto history!

February 07, 2025

Most of the catalysts for the start of the year seem to have played out - now we wait for the new narratives to form.

This Week in Crypto

Flows have chilled out this week a bit in the ETF complex, but volume remains large:

Farside investors

The market of course shit the bed over the weekend given those pesky tariff threats with Mexico and Canada, which came to pass rather quickly.

This is not to say it didn’t cause some carnage, with liquidations totalling up to $10B, according to the ByBit CEO (the largest in crypto history). Ethereum took the brunt of the pain, with a flash crash down to $2100, while Bitcoin tagged $91,000. Don’t get me started on some altcoin charts, which look like a war crime.

The global crypto market cap fell 11%, despite this, historical data shows February has been bullish for BTC in 9 out of the last 10 years, with post-halving February’s consistently green.

The new Whitehouse Crypto and AI Czar David Sacks and co hosted a rather unremarkable press conference, but there are some things to keep an eye on:

  • GENIUS Act Introduced: A bipartisan bill establishing federal oversight for stablecoin's, prioritizing dollar-backed tokens to extend USD dominance globally.

  • Bicameral Crypto Committee Formed: House and Senate committees will collaborate on market structure legislation, building on recent stablecoin and FIT21 proposals.

  • A Bitcoin reserve is to be studied: The Presidential Working Group will evaluate creating a U.S. Bitcoin strategic reserve, though Sacks clarified this remains exploratory.

Note also, Howard Lutnick, former CEO of Cantor Fitzgerald (who own 5%+ of Tether) and current Commerce Chair, has previously disclosed owning "a ton" of Bitcoin is now in charge of overseeing a US sovereign wealth fund. It doesn’t take a genius to put 2 and 2 together here!

And the final thing worth mentioning this week was the House Committee on Financial Services hearing on Operation ChokePoint 2.0:

Microstrategy announced a slightly odd rebrand to “Strategy”, and for the first time in 12 weeks, did not buy any new Bitcoin. But not to fear, it’s clear after their shareholder meeting this week that Saylor will soon be back on the bid:

And finally, a few headlines that caught our eye:

This Week in TradFi

The big news this week in the U.S. is the jobs report: 

  • U.S. job growth slowed more than expected in February, likely restrained by the California wildfires and cold weather across the country.

  • The 4% unemployment rate most likely means the Fed won’t consider cutting interest rates until June. 

  • Non-farm payrolls increased by 143,000 jobs last month, lower than the 307,000 increase in December. This was also lower than the expected 170,000 increase. 

  • Wall Street’s main indexes opened flat today, as investors expect the Fed to remain cautious after the latest batch of jobs data. 

On the international front:

  • President Trump’s tariff threats have left international currencies incredibly volatile. Canada’s dollar hit over 20-year lows before rebounding after news of the tariffs then the tariff delays. The tariff threats and delays have also led the Mexican peso to drop more than 2% and gain almost 4%. The Euro has fallen 5% since the U.S. election, hitting its lowest rate since 2022 on Monday. 

  • India has cut its key interest rate for the first time in almost five years, as the country attempts to boost its economy with inflation beginning to ease towards their 4% target. 

  • Japan’s household spending rose for the first time in five months YoY, with consumer expenditure increasing 2.7% in December. The climb is largely driven by seasonal factors like equipment repairs, automobile purchases, and winter apparel demand.

This Week in Tech

You know how no one could run a sub-2 hour marathon, until one guy did it, and then all of a sudden everyone was doing it? That’s kind of what’s happening in the AI world.

Shortly after DeepSeek spread waves through the tech community, AI researchers at Stanford and the University of Washington have reported that they were able to train an AI reasoning model for under $50 in cloud compute credits.

  • The model, known as s1, apparently performs similarly to both OpenAI’s o1 and DeepSeek’s R1, when tested on math and coding abilities. 

  • S1 began as an off-the-shelf base model, then the team of researchers fine-tuned the model through distillation, a process that extracts the “reasoning” capabilities of another AI model by training on its answers. 

  • Distillation is the same method Berkeley researchers used last month to create an AI reasoning model for under $500. 

  • S1 also double-checks its work, increasing its accuracy, with a very simple trick - researchers just extended the waiting time before the model answers a question.

  • The big question is: why are investors spending millions of dollars if someone can create a comparable model with pennies? 

Palantir shares jumped to an all-time high yesterday, continuing gains already made earlier in the week.

  • Shares rose almost 10%, closing at a record $111.28, after more than quadrupling over the past year. 

  • This comes after the company had given a stronger-than-expected outlook on increased demand for its AI Platform. 

  • Bank of America, Citi, UBS, Wedbush, Morgan Stanley, and others have all boosted their price objects for the stock.

  • Palantir also announced it would integrate Grok, xAI’s chatbot, into its AI Platform.

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

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Disclaimer: None of the above is financial advice, seriously.