First Mover Asia: Bitcoin Hovers Near $23K; Why AI Tokens Are on a Months-Long Tear

Good morning. Here’s what’s happening:

Prices: Bitcoin spent another day near its most recent $23K support. LDO spikes.

Insights: AI-related tokens have been surging for months amid rising institutional investment, writes CoinDesk editor Shaurya Malwa in an excerpt from a Feb. 8 news analysis. But some observers of the space are skeptical that their current ride higher can continue.

Prices

CoinDesk Market Index (CMI) 1,086 −12.6 ▼ 1.1% Bitcoin (BTC) $22,970 −363.2 ▼ 1.6% Ethereum (ETH) $1,655 −31.7 ▼ 1.9% S&P 500 4,117.86 −46.1 ▼ 1.1% Gold $1,886 +8.3 ▲ 0.4% Nikkei 225 27,606.46 −79.0 ▼ 0.3% BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)

Bitcoin Holds Firm Near $23K; LDO Jumps on Armstrong Tweet

What did U.S. central bank Chair Jerome Powell mean in remarks Tuesday at the Economic Club of Washington D.C.?

Crypto investors and otherwise spent much of Wednesday weighing a repeat of Powell's utterances from a week ago that the "deflationary process" had started but that the Federal Reserve would remain vigilant about stamping out high inflation; and somewhat more hawkish remarks from three Federal Reserve governors, including John Williams, who suggested central bankers would consider more aggressive rate hikes if the inflation climate worsened.

Bitcoin digested the latest developments and held steady throughout the day around its current support just below $23,000. The largest cryptocurrency by market capitalization was recently trading at $22,970, down 1.6% over the past 24 hours. BTC's recent lull follows a January surge to remember.

"Bitcoin’s strong start to the year appears to be over for now," Edward Moya, chief market analyst for foreign exchange market maker Oanda, wrote in an email. "After hitting some key technical resistance just above the $24,000 level, bitcoin is entering consolidation modes."

Moya added that bitcoin could lose its current perch with "the next big move in bond yields."

"Bond market volatility will be insane after the Valentine’s day inflation report, which might mean bitcoin could drift towards the $20,000 level if stocks get hammered over the next few sessions," he wrote.

Yields on two- and 10-year U.S. Treasurys both dropped slightly on Wednesday.

Meanwhile, ether followed bitcoin's lead, holding its most recent support comfortably above $1,600, although it was recently down over 2% from Tuesday, same time. But as CoinDesk markets analyst Glenn Williams noted Wednesday in a column column, the second-largest crypto in market value had regained its correlation to BTC after lagging so far this year. Both cryptos are up about 38% since Jan. 1.

Other major cryptos in market value were recently in the red, although Lido DAO's LDO token jumped 8% at one point, much of its gain coming late Wednesday (ET) after Coinbase CEO Brian Armstrong tweeted that he'd heard rumors the U.S. Securities and Exchange Commission (SEC) would like to ban retail investors from engaging in cryptocurrency staking, the income-generating technique at the core of running blockchains including Ethereum.

"I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen," Armstrong wrote.

Equity markets closed down with the tech-heavy Nasdaq and S&P 500, which has a hefty technology component dropping 1.1% and 1.7%, respectively, as markets also continued to mull over mixed, fourth-quarter earnings and jobs data recent that has been defiantly strong, suggesting Fed monetary policy hasn't been fully successful.

"If the Valentine’s Day [Feb. 14] inflation report ends up being a hot one, traders might start believing the Fed’s hawkish pushback," Oanda's Moya wrote.

Biggest Gainers

Asset Ticker Returns DACS Sector Polygon MATIC +1.4% Smart Contract Platform Cosmos ATOM +0.1% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector Gala GALA −6.4% Entertainment Loopring LRC −5.1% Smart Contract Platform Shiba Inu SHIB −4.8% Currency

Insights

What's With the AI Surge and Will It Last?

In a Feb. 8 analysis, CoinDesk editor Shaurya Malwa highlighted the huge gains of AI-related tokens, including the platforms of Alethea's artificial liquid intelligence (ALI), Fetch.ai's (FET) and SingularityNET (AGIX), which have surged as much as 220%. Malwa wrote that institutional interest has helped create a compelling argument for crypto traders to bet on AI-focused tokens as the next growth sector. But will the momentum last? Opinions vary as Malwa notes in an excerpt from his story.

AI broadly refers to the simulation of human intelligence in machines programmed to think and act like humans. Popular applications for this technology have so far been limited to chatbots, self-driving cars, optimizing search in online marketplaces and image-generation software – but futuristic use cases envision wholly autonomous cities, cyborg humankind and interstellar travel.

Much of the recent surge in AI tokens emerged after the public launch of chatbot ChatGPT and image generation software DALL-E in mid-2022. Both are traditional software that do not use cryptocurrencies or blockchain and were launched by OpenAI, which recently raised $10 billion from Microsoft at a $29 billion valuation.

Such institutional interest has helped create a compelling argument for crypto traders to bet on AI-focused tokens as the next growth sector.

"The growth opportunity around the AI and Web3 space combines early interest, potential and hype,” states Ravindra Kumar, founder of crypto wallet Frontier. “While it's true that there may be some hype surrounding AI intervention in the crypto space, we are seeing the emergence of innovative and compelling use cases.’

Aditya Khanduri, head of marketing at Biconomy, takes a milder approach: “I believe that the current AI trend is still pretty speculative, leading to a jump for tokens like OCEAN, ALI, AGIX. Some of the tokens with more buzz and followings have pumped and it's less about the actual tech behind it.”

“This is because the current AI tokens and Web3 projects may not yet know what these decentralized AI tools look like. There's a lot of unanswered challenges and lots to be figured out,” Khanduri told CoinDesk in a recent chat.

The likes of Khanduri say token-based usage while scaling AI software is a hard problem to solve.

“Say an AI tool gets to 250 million users. Then what will its infra look like? How will people use it? How will the data be trained? Where does the token fit in? Can you even have a way to reward people for their data if you used it to train your models?” he said.

Meanwhile, some market watchers remain cautious about the AI token hype.

“Once the market starts livening up a bit, all sorts of new trends come out of the woodwork. And they are not all as solid as they might look,” financial market consultant Valentina Drofa told CoinDesk.

“There is a risk that this whole ‘new trend’ is going to end up in an empty hype, as there are many speculators that would seek to make use of short-term price pumps,” Drofa added, referring to the recent multifold gains put up by some tokens.

“The industry at large will end up dealing with the long-term fallout and another hit to its image. Such cycles are becoming rather tiresome and sad to observe again and again,” she stated.

Important events

8:45 a.m. HKT/SGT(00:45 UTC) Bank of England Monetary Policy Report Hearings

11:30 p.m. HKT/SGT(15:30 UTC) Reserve Bank of Australia Monetary Policy Statement

12:30 a.m. HKT/SGT(16:30 UTC) China Consumer Price Index (YoY/Jan)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Bitcoin, Ether Rise as Powell Talks ‘Disinflation’ Again; Crypto Donations for Turkey

Crypto prices continued their cautious move upwards after Federal Reserve Chair Jerome Powell's comments on disinflation yesterday. Fidenza Macro blog author Geoffrey Chen shared his analysis. Plus, nonprofit organizations were leading an effort to raise millions of dollars in crypto to help victims of the major earthquake in Turkey. CoinDesk Türkiye Editor in Chief Serdar Turan weighed in. SPiCE VC managing partner and co-founder Tal Elyashiv and Kraken Head of Strategy Thomas Perfumo also joined the conversation.

Headlines

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