The Wolf Den #1126 - DeepSeek Delivers Deep Losses
Should you be scared?
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In This Issue:
DeepSeek Delivers Deep Losses
Bitcoin Thoughts And Analysis
Legacy Markets
How Big Was NVDIA’s Drop?
MicroStrategy Has Found Another Way To Buy More Bitcoin
One Million Tokens Are Created Every Week
Erik Voorhees Launches VVV
Bitcoin Crashed! Should You Buy Bitcoin RIGHT NOW? | Macro Monday
DeepSeek Delivers Deep Losses
Everyone and their mother was talking about DeepSeek AI yesterday, and honestly, for good reason—this story is wild. I’m not about to act like an AI guru who can dissect every technical detail or explain why life as we know it has changed forever. What I can do, however, is connect this development to a bigger picture that I actually understand—and, of course, tie it back to Bitcoin.
Here’s the quick rundown of why everyone is buzzing about DeepSeek AI and why markets are losing their collective minds. DeepSeek is a China-based company now emerging as a serious rival to OpenAI and Google in the AI race. Yesterday, it officially dethroned ChatGPT in the Apple App Store, becoming the most downloaded free app. I haven’t tested the app myself, but the word on the street is that it’s just as good—if not better—than ChatGPT.
And here’s the part that has everyone’s jaws on the floor: DeepSeek was reportedly built for just $5.6 million. Let that sink in. In the U.S., it’s been widely assumed that cutting-edge AI development requires tens, if not hundreds, of billions of dollars. DeepSeek’s success is not only disruptive but it is also completely reshaping assumptions about the cost of success in the AI space.
I want to steer this conversation to a book that many Bitcoiners hold in high regard: The Price of Tomorrow, by my friend Jeff Booth. Released in January 2020, it was a bold and forward-thinking commentary on the deflationary impact of technology. What makes its timing extraordinary is how it predates so many seismic events: the COVID-19 pandemic, the Federal Reserve’s money printing frenzy, the 2020 Bitcoin halving, and the ongoing AI revolution. Booth’s insights feel even more prescient today.
“Technology is a deflationary force so great that, in the end, nothing we do will stop it.” — Jeff Booth
Booth argues that our inflation-reliant economic system is fundamentally unsustainable. While governments and central banks depend on inflation to drive growth, technological advancements are an unstoppable deflationary force working in direct opposition to this model. While the idea of a debt-fueled economy is widely accepted, the deflationary pressure from tech isn’t as intuitive—until you really think about it. Once understood, it’s impossible to ignore.
Deflationary technologies are everywhere. Smartphones grow more powerful and affordable over time. They consolidate multiple devices into one, with largely free apps. Streaming services like Netflix and Amazon Prime deliver more value than traditional cable at a fraction of the cost. Booth extends this logic to automation, artificial intelligence, and renewable energy—all of which reduce costs, boost productivity, and make goods and services more abundant, driving prices down. He warns that our relentless money printing will only exacerbate inequality and lead to social instability. His proposed solution? Embrace deflation by shifting to a sound, decentralized monetary system like Bitcoin.
Here are two standout quotes from Booth’s book:
“The majority of the deflation is still in front of us—driven by technology advancing at an exponential rate. If it ‘only’ took $185 trillion of debt over the last twenty years to fight the deflation and drive growth, then it might take that number again, but this time over the next thirty-six or so months. And eighteen months after that, a further $370 trillion.”
“Our economic systems were not built for a world driven by technology where prices keep falling. They were built for a pre-technology era when labour and capital were inextricably linked, an era that counted on growth and inflation, an era where we made money from scarcity and inefficiency. That era is over. But we keep on pretending that those economic systems still work.”
DeepSeek’s breakthrough yesterday epitomizes Booth’s thesis. A Chinese company competing with OpenAI and Google for a fraction of the cost is a testament to how quickly technology can innovate, disrupt, and lower costs. DeepSeek spent just $5.6 million to create an AI rival to ChatGPT (assuming these numbers are accurate) —defying the assumption that cutting-edge AI demands billions in development. The result? A deflationary shockwave across markets as tech dominance, once assumed to be exclusive to trillion-dollar giants, is now within reach for much smaller players.
This isn’t the peak of the AI boom—it’s the opposite. Yesterday’s events underscore the global nature of technological progress and how competition accelerates innovation. China just proved that millionaires, not just billionaires, can now compete at the highest levels. Markets may be rattled in the short term as the repricing of tech companies sets in, but in the long run, consumers win as AI products become more affordable and accessible.
Faster and cheaper technology is good.
The second-order effects? Investors buying the dip, anticipating the U.S. will respond with its own push for AI leadership. This could reignite the money printer or lead to interest rate cuts—both of which fuel market optimism. That optimism spills over into Bitcoin and crypto, driving prices higher and pushing adoption forward. AI and crypto are still in their infancy, but the potential for their crossover is undeniable. What seems cutting-edge today may feel primitive tomorrow.
For now, DeepSeek doesn’t change my crypto strategy. If anything, it reinforced my conviction in the broader narrative. Yesterday was a reminder of why technology-driven deflation is unstoppable—and why Bitcoin, as a hedge against inflation and instability, remains a cornerstone investment.
Bitcoin Thoughts And Analysis
Bitcoin's daily chart shows promising signs of recovery after yesterday's solid reversal candle. The bounce off the 50-day moving average, which aligns closely with the critical support level of $99,860, reinforces the strength of this area as a key line of defense for the bulls. Yesterday’s candle closed higher, leaving a strong wick below, signaling that buyers stepped in aggressively during the dip.
Today, Bitcoin is trading around $102,859, moving higher in an attempt to confirm yesterday’s reversal. A bullish daily close today would provide confirmation of the reversal pattern and set the stage for a potential retest of the next resistance level at $106,099. Breaking and closing above this resistance would solidify the bullish momentum and open the path toward the recent all-time high of $109,358.
Conversely, if Bitcoin fails to maintain its current upward trajectory and closes below $99,860, it would invalidate the bullish structure and could lead to a deeper retracement toward the $90,000 area.
Traders will want to see continued volume and follow-through today to confirm bullish sentiment. Eyes remain on $106,099 as the immediate target for bulls, while $99,860 remains the critical support to hold for the current bullish structure to remain intact.
Legacy Markets
US stock futures rebounded on Tuesday following Monday’s sharp tech selloff, as investors bought the dip in beaten-down chipmakers and energy providers. Nasdaq 100 futures rose 0.7%, and S&P 500 futures gained 0.4%. Nvidia led the recovery, jumping 5% in premarket trading after a 17% plunge the previous day, while Broadcom and Marvell Technology also advanced. Constellation Energy gained 4.7% after losing 21% in the prior session. European stocks followed suit, supported by strong earnings reports.
The dollar strengthened as President Donald Trump pledged more aggressive tariffs, targeting key sectors like semiconductors, pharmaceuticals, and metals. Copper prices fell on the news, while 10-year Treasury yields edged up two basis points to 4.55%. Trump’s administration continues to debate a phased approach to tariffs, potentially increasing them by 2% to 5% monthly.
Traders are now focused on upcoming earnings from Microsoft and Apple, as profit growth for major tech firms is expected to slow to its weakest pace in nearly two years. Some strategists suggested Monday’s losses may have been excessive, encouraging selective buying.
In corporate news, SAP hit record highs after reporting better-than-expected cloud sales, and Siemens Energy gained 5.1% on an improved cashflow outlook. Meanwhile, HSBC announced plans to scale back its investment banking operations outside Asia and the Middle East, sending shares down 0.6%. Analysts remain cautiously optimistic, viewing the dip as a buying opportunity amid ongoing market volatility.
Key events this week:
US consumer confidence, durable goods, Tuesday
Fed rate decision followed by news conference by Chair Jerome Powell, Wednesday
Canada rate decision, Wednesday
Tesla, Microsoft, Meta, ASML earnings, Wednesday
Eurozone ECB rate decision, consumer confidence, unemployment, GDP, Thursday
US GDP, jobless claims, Thursday
Apple, Deutsche Bank, Thursday
ECB rate decision followed by news conference by President Christine Lagarde, Thursday
US personal income & spending, PCE inflation, employment cost index, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.4% as of 5:39 a.m. New York time
Nasdaq 100 futures rose 0.6%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.7%
The MSCI World Index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.6% to $1.0433
The British pound fell 0.4% to $1.2447
The Japanese yen fell 0.5% to 155.31 per dollar
Cryptocurrencies
Bitcoin rose 1.6% to $102,925.57
Ether rose 1.2% to $3,197.02
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.56%
Germany’s 10-year yield advanced two basis points to 2.55%
Britain’s 10-year yield was little changed at 4.58%
Commodities
West Texas Intermediate crude rose 0.5% to $73.53 a barrel
Spot gold rose 0.1% to $2,743.75 an ounce
How Big Was NVDIA’s Drop?
At one point yesterday, losses approached a staggering $600 billion. To put that into perspective, that’s over a quarter of Bitcoin’s entire market cap, equal to Ethereum’s market cap, and nearly half the combined market cap of Ethereum and Ripple. For comparison with major companies, the loss was almost the size of Visa, larger than Mastercard, and over half the market cap of giants like Berkshire Hathaway or Tesla.
Given that the S&P 500 dropped 1.46%, it’s remarkable that Bitcoin only shed about 3%, especially considering Nvidia suffered the largest single market cap loss in history. To contextualize Nvidia’s loss, it was bigger than the total market cap of nearly every company in the world—except for the top 20.
MicroStrategy Has Found Another Way To Buy More Bitcoin
MicroStrategy is launching a new stock class, “Series A Perpetual Strike Preferred Stock (STRK),” to raise funds primarily for Bitcoin purchases and general business operations. STRK holders will earn quarterly dividends, with the payout percentage to be determined later. Dividends can be issued in cash, shares of MicroStrategy common stock, or a combination of both.
Each STRK share comes with a $100 liquidation preference, giving it priority over common stock in liquidation scenarios. Investors also have the option to convert STRK into common stock under specific conditions, offering potential upside if MicroStrategy’s stock price rises. Additionally, MicroStrategy reserves the right to buy back all outstanding STRK shares if less than 25% remain or for tax-related reasons.
This offering balances steady dividend income and priority payments for investors while reinforcing MicroStrategy’s commitment to its Bitcoin accumulation strategy.
One Million Tokens Are Created Every Week
Brian Armstrong recently pointed out that around 1 million tokens are created every week, showcasing the incredible pace of crypto innovation. Yet, Coinbase has faced criticism for not listing Virtuals tokens—assets originating on its own blockchain, Base. Adding to the intrigue, many of these tokens have begun migrating to Solana, sparking speculation about Coinbase’s strategy.
One theory suggests Coinbase is hesitant to list Virtuals tokens to avoid diverting trading volume away from Base. However, this rationale seems counterproductive. Wouldn't it make more sense for Coinbase to spotlight its own ecosystem by prioritizing quality tokens built on Base? After all, Coinbase's mission is to provide access to promising digital assets—what better way to reinforce that purpose than by showcasing the innovation happening within its own platform?
Erik Voorhees Launches VVV
I’ll admit, I’m no expert in the crypto AI agent world, but for once, I might actually be ahead of the curve. Erik Voorhees, one of the sharpest minds in the space, earned a wave of praise yesterday for the launch of VVV—which notably had no pre-sale. Since it’s built on Base, a substantial portion of the airdrop was allocated to "crypto x AI community projects on the Base blockchain."
If you held any of these tokens as of the snapshot date, December 31, 2024, you’re eligible for the VVV token: VIRTUALS, AERO, DEGEN, AIXBT, GAME, LUNA, VADER, CLANKER, MOR. You have until March 13, 2025, to claim your airdrop.
Careful readers might recall that I’ve mentioned Virtuals here before, so congrats if you’re scoring some free tokens. As always, DYOR before claiming tokens or connecting your wallet to any platform—that’s a critical step in protecting yourself. To claim your VVV, click the bottom image below to get started.
“In a world of growing AI integration into our daily lives, we believe it is crucial that humans are able to interact with machine intelligence without centralized surveillance and control. Every message you send to ChatGPT (or Gemini, or Anthropic, or Perplexity, or Grok…) is stored forever—to be reviewed, to be classified, to be sold, to be hacked, to be granted to any government that cares to request it.”
“Agents and other Venice API users can now utilize a crypto token as an access key to a share of total inference capacity. Any staker of the Venice token (VVV) has the ability to consume a pro-rata portion of Venice’s growing API capacity via its API, on an ongoing basis. If you stake 1% of VVV, you get 1% of Venice’s growing API capacity, indefinitely. You do not pay per request.”
Bitcoin Crashed! Should You Buy Bitcoin RIGHT NOW? | Macro Monday
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.