🪡 One big bubble

If you ask most people how they’re feeling about the next year, you’re more than likely to get a bullish response. 

GSR’s Toe Bautista is among those who think crypto could continue its upward momentum, especially since it can leech off of some of the success that artificial intelligence is currently enjoying as a narrative out in the world. 

But he has some concerns about AI. 

“I think most recently, there has been a little bit of hesitation about how sustainable this recent move is, most visibly seen through AI. I think, as is typical with crypto, we get very over-ambitious [on how] quickly these narratives really crystallize into actionable products,” he explained. 

For Bautista, this could set 2025 up for “one of the biggest bubbles we’ve seen probably since the dot com era with AI.”

“You have the ingredients of the biggest companies in the world throwing billions and billions of dollars at compute. You have these AI research labs that are saying we essentially have solved human-level reasoning, and we expect labor to be meaningfully impacted. And you've also seen, from the macro side of it, inflation is still high. But the biggest thing, I think, that markets are trying to figure out right now is how to weigh all of these things.”

Putting it simply: There needs to be more revenue or profit reported, not just multi-billion dollar funding rounds. The demand and supply need to seem more even. 

If Bautista’s correct, that doesn’t necessarily mean that the bubble will pop next year. When it does, though, there’s a risk that crypto could be impacted. To keep an eye on where we stand with the AI narrative, Bautista’s listening to Empire host Santiago Santos, who suggested keeping an eye on Nvidia. The company is the “number one barometer” of the amount of capital flowing into AI, Bautista explained. 

This isn’t to say that Bautista isn’t feeling bullish on AI, just that he thinks it warrants some caution. And Bautista’s the first to admit that he might be off, but that’s not stopping him from being slightly skeptical.

Crypto’s exposure to AI, at least right now, could be beneficial. Take a look at how AI coins have jumped in the past few months, for example. 

“It’s very symbiotic to AI the asset class. And AI, the asset class, is probably going to be one of the biggest growth stories in the past couple decades, if not the biggest,” he said. 

How’s that for cautious optimism?

— Katherine

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• BTC and ETH are holding after rolling over yesterday, now down 5% and 8% apiece on the day (BTC: $96,500; ETH: $3,360).

• December was Base’s biggest month for fee revenue since March, generating $14.7 million, per Blockworks Research data. That’s 35% up on November.

• NFT collection BitmapPunks has burned more ETH than any other contract over the past week: 1,156.50 ETH ($3.9 million).

• BTC open interest continues to fall, losing 15% since its mid-December peak. Current OI: $60.9 billion.

• Solana’s stablecoin supplies have gained 9% in the past week, currently at $5.56 billion.

☠️ Pick your poison

Crypto markets are notoriously difficult. Navigating time bias is perhaps the most challenging aspect of all.

Take the recent dino coin rallies, for instance. 

Prices for tokens tied to much older projects including hedera, algorand, cardano, zcash, iota, vechain, nem (XEM) and tezos (XTZ) rallied so hard over the past six months, that they’re still among the best performing top-end cryptocurrencies over that period.

All have beaten bitcoin, and in the case of XRP and stellar (XLM), they’ve more than tripled BTC’s returns.

What does that say about crypto markets in 2025? Maybe it revealed the priorities of the mass retail investor — they’re back, scooping up coins they might’ve bought when they first discovered crypto in 2018 and 2019.

Maybe that’s the case. Zooming out until then shows most of those coins are down considerably against bitcoin, even after their recent recoveries.

XRP has lost 8% against bitcoin since this time in 2020. XLM has otherwise shed 25%; IOTA 85% and ALGO 86%. XTZ and XEM are even more dire, having tanked ~95% against bitcoin in the past five years. 

Perhaps, then, the recent pumps in dino coins were just reasonable bets on really big bounces.

But even taking the five-year performance at face value is dangerous — coins like TON and FTM were so hot in previous cycles that they’ve both beaten bitcoin by about 400% over the past five years. 

In legacy markets, that might’ve given holders some confidence. But zooming in is likely where the real story is: TON’s bitcoin ratio has slipped by 56% in the past six months, while the market has clearly favored rival layer-1 SUI, to the point that its bitcoin ratio is up 320% in the same period.

Time bias is the most puzzling of all when it comes to Ethereum. ETH’s bitcoin ratio has doubled in the past five years — which sounds great — but at the same time, it has lost 33% in the past six months alone.

Sadly, there’s no easy fix. Old-world advice goes that being too early is the same as being wrong, and that’s obviously not always true in crypto considering how fast it moves.

But knowing when to jump ship is quickly becoming the name of the game.

— David

• Hyperliquid’s Hyperfoundation sought to clarify some misconceptions about validators in a post on X, explaining that no one can buy “a seat at the table.”

• The judge overseeing the SEC’s case against Coinbase handed the crypto exchange a win yesterday, allowing the company to seek an interlocutory appeal. 

• Sol Strategies is making a multimillion-dollar investment in Solana through a credit line, taking a similar approach to MicroStrategy. 

• CFTC Chair Rostin Behnam plans to step down as head of the commission on Jan. 20 but will remain until early February to support the transition into the new administration. 

• Movement Labs is close to closing a $100 million funding round, Fortune reported.

Q: Should TradFi banks lean harder into crypto analysis?

If they branch out too far from analyzing the major coins, it could be self-defeating over the short to medium term.

The noise factor is a real problem. I’m broadly generalizing, but there are plenty of coins (which don’t really need to be named) that perform great for no discernable reason. 

We need solid, actionable frameworks for separating the ghost chains and vaporware coins — ones that have little legitimate activity but still command an outsized presence on TikTok or YouTube — from the more populated parts of the market.

Without them, analysts from old finance will likely end up wasting too much time analyzing trends that don’t matter — and if folks listen to them, it could make crypto markets even less efficient.

— David

If you haven’t read JPMorgan’s Michael Cembalest on his market outlook, you should. 

I think Cembalest does a decent job, for someone at such a big TradFi institution, at looking into crypto. Do I necessarily agree with what he writes (like, for example, that DeFi activity would collapse alongside prices)? No. 

But I still think this shows how far crypto’s come. Don’t expect firms like Goldman Sachs and JPMorgan to start hiring crypto-native analysts later this month, but do expect more and more research to be done on more than just bitcoin. 

Adoption isn’t going to happen overnight, and the critics aren’t just going to suddenly become bitcoin maxis. All of this is going to take some time. And patience. 

— Katherine