Newsletter

CCM Blockchain Newsletter (February 3, 2025)

DeepSeek and Trump's tariffs roiled markets last week, blunting everything from the S&P 500 to bitcoin.

Christian Lopez

03 Feb 2025 — 5 min read

Happy Monday, all, and welcome back to this week’s market newsletter. Please see below this week’s market data.

CCM Digital Weekly Market Update (2025.01.31)

CCM Digital Weekly Market Update (2025.01.31).pdf

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Bitcoin Market Update and News

Bitcoin tumbles below $100k: Bitcoin fell from $104,000 on Friday as the dollar strengthened following news that Trump is making his tariff policy a reality. At the time of publication, bitcoin has largely bounced back from the correction to $99,800.
MicroStrategy lists perpetual preferred stock in latest effort to finance BTC buys: MicroStrategy listed a public offering for 7,300,000 series A perpetual strike preferred stock (STRK) on the Nasdaq last Friday. With shares initially priced at $80, MicroStrategy estimates $563.4 million in proceeds from the sale, which it will use for “for general corporate purposes, including the acquisition of bitcoin and for working capital,” according to a press release. STRK offers an 8% annual dividend, and STRK holders can convert each share to 0.1 shares of MicroStrategy’s class A common stock. As of January 27, 2025, MicroStrategy owns 471,107 BTC.

Interesting Reads and Videos

Bitcoin Mining Market News and Trends

Hive buys Paraguay site from Bitfarms for $85 million: Hive Digital is purchasing a 200 MW bitcoin mine in Yguazu, Paraguay from Bitfarms for an all-in cost of $85 million. Hive will pay Bitfarms $56 million for the site plus $19 million for the site’s PPA deposits, as well as $10 million to finish construction. Hive expects the deal to close by the end of Q1. The acquisition will add 12.5 EH/s to Hive’s hashrate (currently 6 EH/s), and the company expects the first 100 MW to come online in Q2 and the remaining 100 MW in September.
Grayscale launches bitcoin mining ETF: Grayscale launched a bitcoin mining equities ETF last week. Dubbed the Grayscale Bitcoin Miners ETF, the basket includes a mixture of bitcoin miners and computing hardware companies like Canaan and Nvidia. Of the 23 companies in the ETF, MARA, Riot, Core Scientific, Cleanspark, IREN, and Hut 8 make up more than half of the weighting.
Softbank invests $50 million into Cipher: Japanese investment holding company SoftBank has invested $50 million in a private placement with Cipher. The mining company highlighted the investment as a win for its AI/HPC business line. For its part, SoftBank is investing $19 billion into Project Stargate, a $500 billion initiative from President Trump to bootstrap AI investment in the U.S.

Market Overview

Equities rise despite DeepSeek shock: The major indices closed in the green last week after a rough awakening Monday morning regarding the release of a new AI model, DeepSeek. The team behind the Chinese LLM open sourced the model on January 20, with its whitepaper claiming incredible efficiency gains for the time and resources spent to train the model. Investors mistook the cost of the final training run ($5.6 million, which is at least 1/20th the cost to train the latest version of ChatGPT) as the all-in cost to train the model, which sparked a sell-off that took 17% (or $500 billion) off Nvidia’s value and shaved 3% off the Nasdaq. The selloff affected energy sector stocks, as well, but major indices mostly recovered by the end of the week. It’s worth noting that, while DeepSeek may be cheaper to train and run that other LLMs, the $5.6 million figure is not the full cost to train the model. We do not know the full cost (but it is no doubt much larger), and the market overreacted to the news given that the efficiency gains are almost certainly not as drastic as originally thought. Last week's changes to popular indices were as follows:
- S&P 500: 6040.53 (+1.20%)
- Dow: 44,544.66 (+0.90%)
- Nasdaq: 19,627.44 (+2.05%)
- Russell 2000: 2,287.69 (-0.11%)
Dollar surges, futures shaky as Trump Tariffs stir fears of global trade war: President Trump is holding fast on his tariff policy. Last week, the Trump administration announced that a 25% tariff on imports from Mexico and Canada (and 10% for Canadian energy imports) and an additional 10% tariff on China will take effect on February 4. Canada and Mexico have proposed their own tariffs in retaliation, but as of Monday, Trump is reportedly pausing the tariffs on Mexico for at least a month after Mexico pledged to send 10,000 troops to the border to police cartel activity. Following the tariff news the dollar rose to its highest level against the Canadian peso since 2003 and also gained significantly against the peso and euro, and the DXY closed up over 2% week-over-week to 109.67 on Friday. Equity markets reacted less favorably to the news, with major indices selling off on Friday. Futures fared even worse: March and June contracts for the CME’s E-mini S&P 500 Futures traded at 5,944 and 6,004 to close the week.

Oil, natural gas rise on tariff news:
- U.S. oil prices rose over a buck a barrel following the tariff news. WTI Crude closed the week up 0.80% to $73.81/barrel on Friday.
- Henry Hub surged following the news as well, rising 9% for CME March contracts to $3.32/MMBtu.
Gold hits high amid market volatility: Gold rose 1% last week to a new high of roughly $2,830 per ounce, beating the high it set on October 31, 2024. However, with the dollar strengthening amid trade war concerns, gold relinquished most of these gains when it slipped by 1% on Monday morning.
With inflation sticky, Fed keeps rates unchanged: The Federal Open Market Committee met last week, and it decided to neither cut nor raise rates (while across the pond, its European counterpart decided to cut rates for the fifth time in a row). The Fed’s decision comes on the heels of hotter-than-desired inflation data. The Personal Consumption Expenditures (PCE) Price Index rose to 2.6% annually in December (2.8% excluding food and energy prices), and the Employment Cost Index (ECI) increased by 3.8% annually in December.
Q4-2024 GDP lower than expected, could foreshadow smaller growth in 2025: the United States' GDP was 2.3% in Q4, a hair shy of expectations for 2.4-2.6% growth from leading economists. At 2.8%, 2024’s total GDP growth was just below 2023’s 2.9%. Economists surveyed by FactSet expect this number to drop yet again in 2025.