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Source: Grayscale; Compiled by Tao Zhu, Jinse Finance
Summary
- In January, the cryptocurrency market continued to rise, although valuation fell back due to weekend tariff news. A series of events also occurred in January that may impact the digital asset industry for the rest of 2025 and beyond.
- The Trump administration issued a comprehensive executive order on cryptocurrencies, promising to protect key principles of the market, including the right to self-custody digital assets. The order also stated that the government will "promote the development and growth of lawful digital asset-based financial services."
- In addition to policy news, the technical breakthrough of China's AI lab DeepSeek has drawn attention to the demand for decentralized AI models and related infrastructure.
According to our Grayscale Crypto Industry Index developed in collaboration with FTSE/Russell, the overall valuation of the crypto market increased by 7% in January 2025. The Grayscale Crypto Industry Index is a market capitalization-weighted index that tracks investable digital assets. The price of increased by 9% quarter-over-quarter, reaching a high of around $109,000 during the month and ending the month at [1]. Cryptocurrencies with market caps lower than (commonly referred to as "Altcoins") rose by around 4% overall (Chart 1).
Most traditional asset classes also broadly rose in January (Chart 2). 's price appreciation was in the middle of the range when risk-adjusted (i.e., accounting for the volatility of each asset). The weakening of the US dollar and strong performance of several non-US stock markets may have been due to signals from the Trump administration that any tariff increases would likely be gradual - although these expectations ultimately proved incorrect. In contrast, some large tech stocks were suppressed due to increased earnings uncertainty following the announcement of a technical breakthrough in AI development by the Chinese startup DeepSeek. Gold also performed well over the past month and led most other major assets on a risk-adjusted basis. [3]
On January 20th, after President Trump's inauguration, the new administration immediately began changing US policy on blockchain technology and digital assets. The first specific policy change was to rescind SEC Staff Accounting Bulletin (SAB) 121, which required financial institutions to treat custodied crypto assets as liabilities on their balance sheets, effectively preventing them from participating in this business. On January 23rd, under Acting Chair Uyeda, the SEC issued SAB 122, revoking the previous order. This change should allow existing securities custodians to also safeguard crypto assets in the US.
The same day, the White House issued an Executive Order (EO) on crypto policy, titled "Ensuring Responsible Development of Digital Assets." Grayscale Research believes the most important features of the EO are its support for the industry's fundamental principles, including the rights to access open networks, develop and deploy software, engage in mining and staking/validation, conduct peer-to-peer transactions, and self-custody digital assets. It also emphasizes the need to protect individuals' and businesses' access to traditional banking services.
The President's EO also states that the government's policy is to "promote the development and growth of lawful US dollar-backed ." provide a way to transact using blockchain infrastructure denominated in fiat currencies like the US dollar. Today, the total circulating value of exceeds $200 billion (Chart 3). Given the explicit directive in the EO, may be the area where regulatory guidance changes most rapidly. In the EU, policy has been incorporated into the Crypto Asset Markets (MiCA) regulation, which fully came into effect late last year. has reached a regulatory agreement with MiCA, while (USDT) has not, which may be one reason for 's recent market share growth. stated in January that it is developing a strategy for the European market [4] and announced that USDT will join the Lightning Network [5].
Finally, the EO directs the working group to "assess the potential for a US central bank digital currency." [6] Grayscale Research expects the White House to follow through on this commitment, but we are uncertain whether the federal government will raise taxes or borrow funds to purchase on the open market. Additionally, several US states are advancing initiatives to establish reserves, with bitcoinist.com reporting that 14 states (e.g., Texas, Oklahoma) are in legislative processes.
In addition to the crypto policy EO, former President Trump and his family have launched the tokens $TRUMP and $MELANIA on the blockchain. coins are a type of digital asset that do not claim to provide real-world utility but can still have economic value to members of a community (e.g., as collectibles). Chart 4 shows the currently most popular coins by "mindshare" (social media attention). is the dominant coin by mindshare and the largest by market cap.
Over the past year, coin issuance activity on the blockchain has surged, driven primarily by , an innovative platform where users can create and deploy their own coins. In the past year, around 7 million new coins have been created on , with new tokens being issued at a rate of around 60,000 per day on (Chart 5). coin transactions generate fees, providing value to token holders. itself (nearing $150 million in January 2025 alone). [8] As a result, 's fee revenue is comparable to Ethereum's, while 's (fully diluted) market cap is only 35% of Ethereum's. [10] In the past year, Ethereum has lagged in coin activity, possibly due to higher transaction fees.
From the perspective of the cryptocurrency industry, the best-performing segment has been the Currency sector, while the worst-performing has been the Consumer & Culture sector (Chart 6). Our Crypto Industry Index is weighted by the square root of each asset's market cap to reduce the dominance of the largest tokens and better represent the broader market. [11] The strong performance of the Currency sector reflects the rise of . The Ledger (XRPL) is a blockchain designed for fast and efficient digital payments, and is the native asset that supports XRPL and facilitates low-cost cross-border transactions. We attribute 's price performance to several factors, including a notable change in regulatory risk associated with the US government transition. Additionally, the XRPL developer Ripple has reported strong performance, with the market cap of exceeding $500 million [12] and becoming the fourth-largest stablecoin by centralized exchange trading volume in the past month. [13]
Figure 6: Cryptocurrency sector outperformed in January
Just like the traditional market, the development of artificial intelligence technology was the dominant theme of the cryptocurrency asset category in January. Most importantly, on January 20, the Chinese startup DeepSeek launched its new open-source artificial intelligence model R1,
At the same time, DeepSeek news highlighted the risks associated with centralized AI development, such as data security, bias, and censorship systems - risks that can be addressed through blockchain-based AI platforms like Bittensor. Bittensor is a decentralized network aimed at creating an "AI internet" where the interconnected ecosystems are called "subnets", each focused on different specific use cases. Bittensor plans a potentially major network upgrade in mid-February, called dynamic TAO ("dTAO"), which will make it possible to invest in individual subnets; we believe this could inject a wave of new liquidity into the Bittensor ecosystem. [16] Access to DeepSeek's high-performance open-source models could also reduce costs and lower the entry barrier for many open-source decentralized AI projects, especially at the application layer, such as AI agents. We have already seen this happening. For example, the decentralized AI agent launchpad ai16z (renamed ELIZAOS) allows agents built using its ELIZA framework to access DeepSeek's models.
The digital asset industry is rapidly evolving - as a series of news in January 2025 has shown. While there are many different developments, overall they indicate increased regulatory transparency, growing institutional adoption, and continuous technological progress. The new tariffs announced by the Trump administration at the end of January may put pressure on all markets in the short term, and cryptocurrency investors need to closely monitor these developments. In addition to tariffs, Grayscale Research expects the crypto market to focus on the ongoing changes in regulatory guidance from the U.S. federal government on stablecoins and other topics, as well as other macroeconomic issues, including the outlook for U.S. tax policy and the prospect of Federal Reserve rate cuts.
Notes
[1] Source: Artemis. Data as of January 31, 2025.
[2] Source: Bloomberg.
[3] Source: Bloomberg. Data as of January 31, 2025.
[4] Source: Crypto Slate.
[5] Source: Coin Telegraph.
[6] Source: Transcript vs Roll Call.
[7] Source: Artemis. Data as of January 25, 2024.
[8] Source: Dune Analytics. Data as of January 25, 2024.
[9] Source: Token Terminal. Data as of January 31, 2025.
[10] Source: Artemis. Data as of January 31, 2025.
[11] Source: Artemis. Data as of January 25, 2025.
[12] Cryptorank
[13] CCData Stablecoin and CBDC Report, January 2025.
[14] "How China's Top AI Models Overcome U.S. Sanctions." MIT Technology Review. January 24, 2025
[15] "China's DeepSeek AI Shakes Up Industry and Deflates U.S. Momentum." BBC. January 28, 2025.
[16] X.com
