How DeepSeek and Fed shape NASDAQ, VIX, and BTC trends

In this report:

• Price Action Coming Off The Back Of Last Week.
• DeepSeek And Its Impact On Big Tech & Crypto.
• The FED, Data And Earnings This Week.
• Cryptonary's Take.

Price action coming off The back Of last week

Last week, the market felt euphoric in terms of sentiment ahead of Trump's inauguration day and even during the week as Executive Orders dropped. Throughout the week, pro-Crypto Executive Orders were signed, and the market quickly moved higher.

However, these higher prices were sold, and BTC couldn't sustain the upside. After just a few days, momentum couldn't be sustained, and the price felt exhausted to the upside.

This was particularly the case when an Executive Order was signed that said 'the exploration of a Digital Asset Stockpile'. This wasn't really what the market was looking for. The market wanted more clarity and more definitive action towards the Trump administration establishing a Strategic Bitcoin Reserve.

If a Strategic Bitcoin Reserve is to come, what would be the best way for the Trump administration to do it? It wouldn't be to openly announce it to the world, to then let the whole world front-run them. The way to do it would be to remain quiet on it for a while, accumulate the BTC they're after, and then announce an SBR in the coming months/quarters when they already own the BTC.

Don't get this wrong; many of the executive orders were phenomenally positive for crypto in the long term. The market has likely just got ahead of its ski's short-term.

DeepSeek And its impact On big tech and crypto

Over the weekend, a Chinese start-up released DeepSeek. Essentially, this is an app that's a rival to ChatGPT, but it's been done for a fraction of the cost... supposedly. This raises big concerns over the big tech companies and whether or not their large capital expenditure into AI is necessary, as a Chinese start-up has seemingly produced a model that costs a fraction of the cost and has used less advanced chips. However, investors are questioning if this is legitimate, i.e. Has a Chinese start-up really accomplished this with the stated $ cost they're suggesting? Investors seem sceptical of this currently.

This is why we're seeing this sell-off in Big Tech today, and therefore also in the main Index's (S&P and Nasdaq). Interestingly, the Russel 2000 (Small-cap companies) is down less than the Nasdaq.

Nasdaq 1D timeframe:

Interestingly, the VIX has retraced its move higher from the Open. This suggests that, for now, investors are buying this dip.

VIX 1D timeframe:

As a result of the above, Crypto has been hit, and this is likely due to the exhaustion we seemed to get towards the back of last week, plus the larger move down in the Nasdaq that we've seen so far today.

For BTC, the price broke below the pennant, but it was heavily bid into support. This was the horizontal support of $98,900 and the main downtrend line, with price now using that as support. So far, it's a good recovery. But we need to see if it sticks in the coming days.

$BTC 1D Timeframe:

The Fed, data, and earnings this week

In terms of macro, we have a busy week ahead. We have the FED on Wednesday, GDP on Thursday, Core PCE on Friday, and Big Tech Earnings throughout the week.

On the FED Meeting this Wednesday. The FED will keep rates on pause as the market has priced. The focus will be on the Powell Press Conference, which will be the same as usual. Powell delivered a Hawkish Press Conference in December, and the expectation is that he'll be hawkish again. The question is whether he'll out-hawk the market or not. Trump has called for lower rates, and Powell and Trump don't get along, so it wouldn't surprise us to see Powell deliver a hawkish Press Conference to somewhat go against Trump.

What will also be interesting to see this week is the Big Tech Earnings. The market will first be looking to see if there are beats. It'll then look at the forward guidance, the reaction to DeepSeek, and whether capital expenditure is necessary.

Alongside the above, there's the macro data. We'll be watching that and reporting on it. All in all, there are a number of potential headwinds for the markets this week, and therefore, we're looking for a lot of things to fall our way.

Cryptonary's take:

It's another huge week, so be prepared to continue seeing a market that whips as the data comes in. For now, having some cash on the side is probably wise, so I can use that to take advantage of any screaming opportunities that might arise in the coming weeks. But, in slightly zooming out from this, we're probably now viewing the market in two key ways:

1. This is a Bitcoin-driven cycle with no major retail euphoria. This likely sees BTC continue to push higher, and come to the end of the year, we're likely much, much higher. This is a push from Institutions and Banks, which is what we've always wanted. Unfortunately, it's not fast. Institutions are famously slow.
2. In the meantime, this environment means that we might struggle to see an all-out alt-season. But don't look at this as a negative. This is a positive. It's very possible we will remain in this Player-Vs-Player environment. And with Alts/Meme's struggling across the board but new metal/sectors doing well and having their 'hot' periods, this actually opens the door to more opportunities throughout the year. For instance, an outright alt-season would see everything grind up, which is easy, and you'll get good gains. But, it's hard to find 10-100x's. In a boring market, where most things struggle, hot metal has performers that give us the opportunity to find those potential performers who can then do well. In that environment, everyone will chase those winners (essentially because everything else isn't doing that great). That then provides the opportunity for the new 'hot' performers to pull bigger individual gains as a tonne of capital rotates to that. However, this will mean being less emotional about certain plays and being ready to pull the sell trigger once a certain play has pulled mega gains.

For the coming quarter or two, we expect this to be the environment. BTC and SOL to perform well, the rest to probably not do anything crazy, and then new meta to have individual winners that go on crazy runs ($10m MCaps to $1-3b MCaps - look at fartcoin, for example). In this environment, everyone will chase the winners, which is why you can get plays that go on to make mega gains whilst everything else underperforms (again, fartcoin).

Going forward, this is likely to be more of the strategy we adopt. Barbell, plus new opportunities. Low emotions, and be willing to rotate once great gains are achieved.

It'll be up to me (Tom) to get the risk-on/risk-off environments right. And then it'll be up to the Research department to find the hot plays in the hot metas during those periods of risk-on.

We miss some plays like everyone does, but mostly, our track record is great for all those who have been with us for 6-12 months.

I'm super confident for 2025. And those that'll perform the best in 2025 are those who are active and ruthless in taking wins when up many multiples and then rotating into Majors and USDT/USDC for the new opportunities that we'll inevitably get.