Feb 3, 2025: Our weekly Institutional Insights explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

 explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

Weekly Highlight — PCE Muted in January 2025

The Federal Reserve's key inflation measure remained subdued in December 2024, with real incomes softening, potentially paving the way for interest rate cuts this year. Meanwhile, the core personal consumption expenditures (PCE) price index increased by 0.2% from November 2024 and 2.8% year-over-year, while real disposable income saw minimal growth for a second consecutive month, leading to a drop in the savings rate to a two-year low of 3.8% that could put consumers at risk if incomes decline, according to LPL Financial's chief economist.

On a three-month annualized basis, the core PCE rose 2.2%, the slowest since July, alleviating some inflation concerns. Federal Reserve Chair Jerome Powell indicated that further rate cuts depend upon progress toward the 2% inflation target amid uncertainties surrounding president Trump's policies.

In related data, labor cost growth slowed and consumer spending rose by 0.4% in December 2024, driven by strong demand for durable goods. Fed officials remain cautious about rate adjustments, influenced by a resilient labor market and upcoming revisions to job growth data. Additionally, the economy's GDP grew by 2.3% in the fourth quarter, supported by a significant increase in personal spending.

Weekly Crypto Highlight — Crypto Forgets DeepSeek Crash

On Jan 27, 2025, Bitcoin prices dropped 6% as markets reacted to the launch of DeepSeek, a new open-source AI model from China, which investor Marc Andreessen describes as "AI's Sputnik moment." Developed for under $6 million using less advanced NVIDIA hardware, DeepSeek emerged as a competitor to U.S. firms like OpenAI, unsettling investors and leading to significant losses in tech stocks, including a nearly 17% drop for NVIDIA.

The cheaper, more efficient AI model also negatively impacted energy utility stocks that expected revenue from power-intensive U.S. models. Major cryptocurrencies, including Bitcoin and Ether, fell 6% and 7% respectively, reflecting a broader market sentiment, rather than a direct correlation to DeepSeek.

Despite the volatility, some analysts remain optimistic, noting Bitcoin's stabilization amid ongoing Nasdaq-100 declines. The open-source nature of DeepSeek may foster innovation in AI development, with industry figures suggesting it could enhance cheaper, faster AI systems.

However, privacy concerns surround DeepSeek, with regulatory scrutiny emerging in the U.S. and EU over its data policies. Critics warn it may serve as a Trojan horse for data collection, echoing past controversies with Chinese tech. 

Overall, while DeepSeek's immediate impact on crypto appears limited, its long-term effects on the AI landscape and market dynamics have yet to be fully realized.

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Weekly Institutional Insights: DeepSeek in the Past as Macro Seems to Favor Risk Assets

Tether is integrating its USDT stablecoin into the Bitcoin Lightning Network using the Taproot Assets protocol.

The S&P 500 rose 0.53% on Thursday and is up 3.2% for the month, driven by positive tech earnings despite ongoing market volatility. Gold prices surged to a record high on Thursday due to safe-haven demand amid U.S. tariff threats. Spot gold rose 1.4% to $2,796.15 per ounce, while U.S. gold futures increased by 2% to $2,824. Coindesk Indices, an index measuring broader cryptocurrency market performance was up by 1.01%, with Bitcoin and Ether rising by 0.65% and 3.31%, respectively in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is AR, which surged nearly 20.9% following KYVE's archiving of 10TB of Web3 historical data on Arweave.

Arweave (AR), launched in June 2018, is a decentralized platform for permanent data storage. It uses its AR cryptocurrency to ensure data permanence, offers easy web access, and partners with the Internet Archive to secure data preservation. KYVE has 

 over 10TB of compressed, trustless data onto Arweave, including historical chain data from Ethereum, Osmosis, Celestia, and Archway, making Web3 history easily accessible.

Check Out the Latest Prices, Charts, and Data of 

 its USDT stablecoin into the Bitcoin Lightning Network using the Taproot Assets protocol. This partnership, announced at the Plan B conference, aims to expand Bitcoin's functionality and allow USDT payments on Lightning. Tether, with a market cap of $139.4 billion, processed $10 trillion in transactions in 2024 and operates across multiple blockchains. The integration is expected to benefit users in emerging markets and support future transactions between AI agents and autonomous vehicles.

Yesterday, the BTC Spot ETF saw a total flow of $266.6 million, all from non-GBTC sources.

D3 is developing a DomainFi network on the Doma Protocol and has raised $25M from top VCs. They are partnering with projects like Solana Foundation and Avalanche. To potentially qualify for an airdrop, you can buy a domain for $10/year. Payments can be made with Ethereum or the domain's respective chain. Participation carries some risk.

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Tether Brings USDT to Bitcoin Lightning Network

Our weekly crypto derivatives analytics report delves into macro events, the current state of crypto and trading signals from spot trading volume, as well as futures, options and perpetual contracts.

Markets faced a significant risk-off event early this week as DeepSeek's LLM announcement coincided with sharp declines in major indices and crypto markets. Despite the volatile sell-off in spot markets, open interest in perpetual swaps remained stable, with funding rates briefly turning negative before recovering. 

Options markets saw an increase in trading volume during the sell-off, although forward-looking volatility expectations declined. The period of positive funding rates for perpetuals ended due to bearish spot price action on Monday. In the options space, realized volatility fell below implied volatility, reflecting a small-scale repeat of the pre-inauguration term structure inversion. Notably, ETH options maintained a volatility premium over BTC options, while longer-dated volatility smiles exhibited a bullish skew toward out-of-the-money (OTM) calls.

Please check out the report’s highlights.

Options open interest data shows minimal change over the past week, except for the expiration and reopening of short-dated options. Despite the largest single-day trading volumes in call options this month — nearly $250M during the spot price sell-off — trade volume did not significantly impact volatility, which has declined for both realized and implied metrics. Positioning has split between short- and longer-tenor volatility smiles. Short-tenor options are exhibiting lower volatility and a neutral skew, while longer-dated volatility smiles are reflecting increased volatility expectations and a persistent bullish skew toward OTM calls, as has been the case since the election.

ETH options trading volume has surged over the past week, marking its strongest levels in a month. While late December 2024 and early January 2025 saw robust activity, recent data indicates a more active calls market, with open interest remaining heavily weighted toward calls. The early-week global market sell-off briefly shifted short-tenor ETH volatility smiles away from calls, reminiscent of the volatility term structure inversion seen before the inauguration. Despite ETH's spot recovery being weaker than BTC's, its options have maintained higher volatility levels.

Following last week's rally in spot price due to the launch of two presidential meme coins, Solana's price has retreated with the broader crypto market. However, positioning from the rally remains largely unchanged, with open interest in puts and calls remaining elevated and trading activity surpassing pre-rally levels. The stable levels of newly opened put options likely reflect protective buying intended to hedge profitable long positions in other instruments.

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Bybit X Block Scholes Crypto Derivatives Analytics Report (Jan 29, 2025): Options Market Recovers From Monday’s Sell-Off

Phantom wallet has officially integrated Sui, making it the first Move-based blockchain and third Layer 1 supported on the platform. 

The S&P 500 fell 0.47% amid Fed rate pause and mixed tech earnings. Gold fell 0.4% as the dollar and Treasury yields rose after the Fed held rates steady, offering little clarity on future cuts. Coindesk Indices, an index measuring broader cryptocurrency market performance was up by 2.07%, with Bitcoin and Ether rising by 2.99% and 2.90%, respectively in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is TAI, which surged nearly 38.6% following the unveiling of the Sona framework by TARS AI for cost-efficient AI computation.

TARS AI (TAI), launched in 2022, is a decentralized, multichain platform offering AI-powered tools to help web3 projects launch and manage tokens efficiently. Rebranded in 2023, it supports eight blockchains, including Ethereum and BNB Chain, with plans for expansion. TARS AI is set to 

 two custom frameworks in V1 of its AI Market, including Sona, a proprietary framework compatible with DeepSeek AI for efficient, low-cost computations. More details will be revealed in February.

, making it the first Move-based blockchain and third Layer 1 supported on the platform. This gives Phantom’s 15 million users access to SUI, enabling them to send, receive, swap, and interact with Sui-based tokens and dApps. Sui has rapidly grown, reaching over $2 billion in TVL and becoming a major destination for Ethereum outflows. Phantom's CEO praised Sui’s scalability and user experience, aligning with their multichain vision. The integration marks a significant step in expanding Sui’s adoption and accessibility.

Yesterday, BTC Spot ETFs recorded $120.4M in inflows, entirely from non-GBTC funds.

 tasks to boost Grass points, offering up to 30% in bonuses. Users can earn boosts by swapping $10K on Lifinity, trading meme coins on Fighthorse, or betting $1K on Skate x Polymarket. These points may play a key role in the Eclipse airdrop.

Phantom Wallet Integrates Sui, Expanding Access for 15 Million Users

Bybit Learn

DeFi

Did you know that anyone who holds governance tokens can influence a project's future direction? Find out more about how governance tokens work in this article.

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, we can't talk about cryptocurrencies and 

 without mentioning the utility of governance tokens. While most crypto investors focus on 

, there are a wide range of tokens to consider, including 

While Bitcoin perennially remains a hot topic in the crypto scene, governance tokens preserve a critical aspect of 

. Not only can governance token holders help shape a protocol's future, but they also bring the community’s members closer. This guide offers a detailed overview of governance tokens and how they work.

Governance tokens are cryptocurrencies built on blockchain platforms, that grant holders the right to participate in the governance of a protocol.

Token holders have a say in proposing new features to a project and making changes to its governance system, depending upon their voting powers. The voting power of each token holder is proportional to the number of tokens they hold. The more governance tokens they hold, the more influence they have.

Governance tokens are designed to provide holders with ownership in fully decentralized protocols. Anyone who holds a governance token can influence a protocol’s future direction.

Most protocols accommodate a standard proposal submission process that lets developers make various proposals. In the event that a submission is taken to a vote, token holders can use their voting power to influence any potential change to the project. Governance tokens are considered to be a key decision-making mechanism within 

Centralized governance means that the board of directors or shareholders of a corporation has full discretion over decisions about strategic direction. Governance tokens gained popularity within the DeFi system (as opposed to centralized governance) as a way to govern the decentralized ecosystem, and to foster better community involvement, decentralization and decision-making without relying on centralized decision-makers.

, they’re outfitted with characteristics such as transparent distribution and immutable token ownership, which makes DAOs a perfect laboratory for the decision-making process.

When a governance proposal is taken to a vote, token holders get the opportunity to position their vote on the blockchain. In most cases, the voting power a token holder has is directly proportionate to the total number of tokens that they hold. Therefore, anyone who has 1,000 governance tokens will have double the voting power of a holder with 500 tokens. Nevertheless, each DAO has slightly different governing methods. The types of governance proposals for which token holders can vote typically include:

The following are the two distinct governance models for decentralized governance.

On-chain governance refers to the decentralized decision-making processes implemented directly on a blockchain. With on-chain governance, rules are essentially hard-coded into the protocol, which means that any decision will immediately be translated into readable codes. Projects such as 

 plan to use on-chain governance in the future. 

One of the core challenges includes the difficulty for token holders to be participating in decision-making processes, disagreements and conflicts that arise within a community that can result in a governance deadlock. This occurrence may lead to a potential hard fork, or blockchain splits which different governance approaches. 

Off-chain governance means that decision-making processes occur on a more social level before developers encode them into the protocol. At the moment, 

 primarily use off-chain governance. For instance, Ethereum obtains improvement protocols through 

, while developers on Bitcoin display their improvement proposals via the mailing list.

Many users believe that off-chain governance has more checks and balances in place than on-chain governance. Miners are responsible for deciding if proposals will be adopted. However, users can respond by selling their tokens or switching to another protocol.

Governance Tokens vs. Security Tokens vs. Utility Tokens

Governance tokens represent voting rights within DeFi protocols. They distribute the power of decision-making on a blockchain, from a completely centralized structure over to a community — token holders who are also protocol owners. Token holders are typically invested in the project's future because their decisions will influence the outcome of the project. 

Beyond voting rights, governance tokens distinguish themselves from their utility for staking purposes, yield farming and crypto loans. For example, the most popular governance tokens used include 

Security tokens, on the other hand, are designed to comply with securities regulations and offer investors protection and regulatory compliance across different jurisdictions. These tokens are usually backed by real-world assets, such as art, company equity, commodities and more. Security tokens facilitate the entry of investors into high-value assets by allowing them to own a fraction of them through the exchange of compliant security tokens.

A utility token is a digital asset mainly used for payment and for access to a product or service. These tokens boast adaptability and functionality for blockchain protocols or decentralized applications (

). For example, Binance Coin (BNB) serves its utility by giving holders the right to vote to list tokens, unlock trading rebates and enjoy priority for exclusive events and services, such as Binance Launchpad.

However, not every token is considered to be a currency. It's common for global supply chains to use these tokens in order to benefit from blockchains and 

Below is a brief table describing the differences between the three tokens being discussed.

Governance tokens protect a blockchain’s integrity by giving participants the right to make decisions and govern the platform. The value of these tokens comes primarily from governance rights to make changes to the existing protocol, which eventually benefits holders as the platform takes shape. These tokens are usually traded, swapped, exchanged and staked, which means possessing them can be considered a type of passive income stream.

In general, governance tokens become more valuable as projects get adopted 

 their value mostly gained from the success of the projects. While they may not be valuable initially, the value of governance tokens tends to appreciate proportionally to a project's growth, and increases further as the number of tokens in circulation reduces once a DeFi protocol initiates token burning.

If you've obtained governance tokens due to your investment in a blockchain project, you'll gain several benefits when using them, from better efficiency to more opportunities for collaboration.

The main benefit of governance tokens is that they accommodate decentralized governance. Developers who implement decentralization within their web3 projects can use governance tokens to do so. If these tokens weren't in place, DeFi solutions would mainly involve copious amounts of smart contracts.

Once a proposal is made, token holders are free to collaborate after holding discussions among themselves. Anyone who holds tokens can state how they’ll vote, while also obtaining incentives to collaborate with other community members who intend to vote the same way.

Another benefit of governance tokens involves the efficiency that they offer. Having a governance token gives community members a sense of involvement in the project, as they now have a say in it. This then leads to more active participation, since members want to see the project succeed, effectively resulting in more efficient decisions pertaining to the project.

While governance tokens are highly beneficial for web3 and blockchain projects in general, there are a few challenges for crypto companies issuing governance tokens to consider.

The most serious challenge involves the potential for malicious actors using their governance power to make decisions that only benefit themselves, as opposed to the overall community. If someone with a large amount of voting power is also a bad actor, the resulting decision for the protocol could be a poor one.

 are investors who make exceedingly large investments, which means that they gain access to a considerable amount of governance tokens. This can pose a problem, due to the sheer magnitude of their voting power — since decentralization is one of the primary purposes of blockchain projects.

At the moment, governance tokens don't come with much accountability. If a project fails, it's difficult to determine who's responsible for the failure.

, which focuses on full decentralization. The developers’ main goal for this governance token is to provide the Yearn Finance community with control over the project. This token also emphasizes the potential for developing a truly self-sufficient DAO.

, considered to be among the most popular lending platforms on web3. Anyone who holds MKR governance tokens can use them to vote on changes to the platform's economic rules.

 is the primary governance token for the Uniswap protocol. Token holders can take part in decision-making processes as they relate to the Uniswap platform. However, Uniswap developers still retain control over how the project will continue in the months and years ahead, which means that this protocol is more centralized than some others.

Initially designed for the purpose of rewarding early adopters, ENS governance tokens were 

, toward the end of 2020. Subsequently, the price of these tokens has increased significantly. Because of the large increase in their value, early adopters have been rewarded for the initial support they gave.

Anyone who holds a COMP token can use it to participate in Compound’s decision-making process, or to delegate their voting rights to someone else who can then vote on behalf of the token holder.

Even though it's difficult to predict the future of any aspect of the crypto industry, governance tokens have already proven their worth in the crypto space and will likely be critical to future industry growth. By facilitating DAOs, token holders can help create a lasting community, while also being sure to voice their own opinions. These communities can take many different shapes, from 

Because of the importance of governance tokens to decentralization, they will likely continue to grow in relevance depending upon how widely DeFi and DAO models are adopted. By providing the broader community with the ability to manage a project, a DAO allows that community’s decisions to directly influence a project’s success.

Anyone holding a governance token can vote on proposals, from changing reward distributions to altering the entire governance structure of a DeFi project or organization. Governance tokens foster active collaboration in ongoing decision-making processes among token holders. Despite their already-proven relevance, the value of these tokens is likely to grow further as adoption spreads.  

Governance Tokens: What Are They and How Do They Work?

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