Jan 6, 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.

Weekly Highlight — Markets Snap Five-Day Loss Streak 

Investors are now seizing the opportunity to buy the dip in U.S. stocks after a five-day decline that erased over $1 trillion in market value. Wall Street has broken its longest losing streak since April, with the Nasdaq-100 rebounding 1.7% and the S&P 500 rising 1.3% on Friday, January 3. These gains slightly offset the week's sell-off, which had continued into the new year following a tough December.

Despite concerns about slowing earnings growth among tech giants like the Magnificent Seven, traders remain optimistic, especially regarding AI leader NVIDIA Corporation. The market believes that, as long as retail investors keep investing in AI, the associated stock market boom is expected to persist. 

Stocks reached their session highs in the afternoon after Mike Johnson was reelected as speaker of the U.S. House of Representatives, indicating potential support for a business-friendly agenda. Meanwhile, bond yields rose, with the 10-year hitting 4.6% following comments from Richmond Fed President Tom Barkin about maintaining restrictive rates. U.S. manufacturing showed modest growth, with new orders at their highest since early last year, while investors assessed economic strength against the possibility of slower interest-rate cuts.

Weekly Crypto Highlight — AI Agent Spring Coming

Many investors are eagerly anticipating an Alt Season, a period when altcoins typically surge in value. However, current market dynamics suggest we may not see a widespread altcoin rally. The sheer number of tokens, combined with limited liquidity, has led to what's known as altcoin dispersion, making it crucial to select the right sectors and tokens.

, which are thriving even as the broader market declines. This nascent sector is experiencing rapid advancements, and its associated tokens face less pressure from venture capital unlocks. Many of its top protocols lack centralized exchange listings, indicating more buyers may enter the market.

Those investors who missed previous opportunities, such as the DeFi summer of 2020 and the Alt Layer 1 trade, now have another chance. Instead of targeting individual AI agents, the best risk/reward strategy lies in investing in infrastructure plays, which serve as the foundational tools for the sector.

The leading AI agent player is Virtuals Protocol, a platform for launching tokenized AI agents on the Base network. By purchasing tokens like Luna by Virtuals (LUNA) and VaderAI (VADER), users gain governance rights over specific agents, which allows them to both influence development and share in profits. 

Recently, daily protocol fee revenues dropped significantly in mid-December 2024 as activity slowed for the holidays. However, speculation around agent-associated tokens surged as the new year approached. Currently, Virtuals Protocol generates over $1 million in daily fees, though this is 50% less than figures for early December. Despite these challenges, the VIRTUAL token has more than doubled in value, reaching a market capitalization of $4.6 billion.

Other highlighted opportunities include Zerebro, which is pivoting to a full-stack framework for AI agents; ARC, with its Rust-based framework; and 

 (GRIFFAIN), a natural language on-chain search tool. These projects are well-positioned for future growth in the evolving landscape of AI technology.

 as we delve into leading AI agent tokens and the past week’s market movements. 

Advanced

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Weekly Institutional Insights: Market Snaps Five-Day Loss Streak; AI Agent Spring Coming

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

December's end-of-year options expiration brought an unexpected drop as realized volatility fell to the lowest levels of the month. Perpetual swap open interest remained stable, indicating these markets weren't heavily used for hedging against expired options, likely contributing to the muted volatility. 

While most expired open interest in Bitcoin (BTC) and Ethereum (ETH) hasn't been reinvested, the balance of calls and puts remains consistent. Notably, ETH options are pricing in higher implied volatility as compared to BTC, particularly for shorter expirations, leading to a flat term structure for ETH, while BTC is offering cheaper options exposure.

In the perpetual markets, low volatility and minimal spot movements have led funding rates for nearly all tokens to mirror broader market sentiment throughout the holiday season. On the options side, BTC's term structure is noticeably lower and steeper than ETH's, with realized volatility now dipping below implied volatility levels, highlighting an intriguing shift in market dynamics.

Please check out the report’s highlights.

Open Interest Solid Amid Year-End Options Expiration

Although open interest for both BTC and ETH perpetual swaps hasn’t returned to early December 2024 highs, it remained robust throughout the significant end-of-year options expiration event. This suggests that these markets weren’t heavily utilized to 

 of the expiring options contracts, likely contributing to the lack of volatility observed during this period. Instead, trading volumes have dipped noticeably during the winter holiday season, coinciding with a collapse in realized volatility back to December 2024’s lowest levels.

BTC Option Curve Remains Steep During Call-Put Parity

The expiration of December's end-of-year options didn’t trigger the anticipated surge in volatility; instead, realized volatility has plummeted to the lower end of its recent range. The implied volatility term structure remains steep compared to both its recent behavior and ETH's, with longer-dated implied volatility around 57%, and 1-week at-the-money options trading about five points lower. Much of the expired open interest hasn’t yet been rolled into new positions, maintaining a neutral balance between puts and calls. Consequently, BTC's options market positioning is relatively neutral, lacking the leverage it had at the start of December 2024.

Huge ETH Option Expiring Doesn’t Cause Volatility

A late December spike in realized volatility didn’t carry into the new year, with ETH’s spot price currently exhibiting volatility below that of short-tenor implied volatility. Interestingly, the implied volatility term structure has undergone a steepening and re-flattening over the past week, contrasting with BTC’s slightly steeper profile. This suggests that ETH’s options market is anticipating higher short-term volatility in spot price movements. 

Despite the significant expiration of options open interest at the end of December 2024, which didn’t lead to a rollover into later expirations, call options continue to dominate the market and have increased at the start of 2025.

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Bybit X Block Scholes Crypto Derivatives Analytics Report (Jan 2, 2025): BTC Options Continue to See Call-Put Parity, With Lower Short-Term Volatility Expected

Dive into FLock, a decentralized platform that revolutionizes the way AI models are developed, trained and deployed.

Artificial intelligence (AI) is poised to transform countless industries, but its development often raises questions about privacy, control and inclusivity. 

 is a unique decentralized platform that democratizes AI training, fine-tuning and inferencing. With its blockchain-powered infrastructure, FLock ensures transparency, security and community-driven decision-making, paving the way for AI models that align with established societal values. 

In this article, we’ll explore how FLock decentralizes AI training, its key features and its potential impact on developers, communities and users.

 platform that revolutionizes the way AI models are developed, trained and deployed. By leveraging blockchain technology and a novel approach called 

, FLock addresses critical issues in AI development, such as centralized control, lack of transparency and privacy concerns.

At its core, FLock’s mission is to democratize AI by enabling communities to participate directly in the creation and refinement of AI models. Through federated learning, FLock trains AI models across multiple decentralized devices or servers. This method ensures that data remains local, eliminating the need for raw data exchange while still enabling robust model training. By decentralizing the training process, FLock not only protects individual privacy, but also fosters a more inclusive ecosystem in which diverse contributors can collaborate.

What sets FLock apart is its integration of 

. This ensures that all contributions — whether data, compute power or feedback — are transparently recorded and fairly rewarded. Blockchain tech’s immutable ledger enhances trust among participants and safeguards the process against manipulation. Additionally, the platform’s on-chain incentive mechanisms encourage participation from a wide range of contributors, ensuring that rewards are distributed equitably.

Ultimately, FLock empowers communities to develop bespoke AI models tailored to their specific needs. By decentralizing the process and prioritizing transparency and collaboration, FLock breaks the monopoly of large corporations, creating an AI ecosystem that aligns with public ethics and societal values.

, an Oxford alumnus with a robust background in AI and blockchain technology. Sun, who serves as FLock's CEO, has an impressive career trajectory, having worked as the Director of AI for the Royal Bank of Canada and as an AI Research Fellow at Imperial College London. His vision for FLock stems from a deep understanding of both the technical and ethical challenges of AI development.

The founding team also includes other Oxford alumni, boasting over a decade of combined experience in AI research and the cryptocurrency industry. This team brings a collective blend of academic excellence and practical expertise that positions FLock to lead the decentralized AI movement.

FLock has successfully raised $11 million in funding across two rounds, reflecting strong investor confidence in its vision. In May 2024, FLock secured a $6 million seed round co-led by Lightspeed Faction and Tagus Capital, with additional backing from Digital Currency Group (DCG), Volt Capital, OKX Ventures and Inception Capital.

Later, in December 2024, FLock announced a $3 million successful funding round led by DCG and joined by prominent names like Animoca Brands, Fenbushi Capital, GnosisVC and GSR. These investments are being channelled into enhancing the platform’s testnet and federated learning client, accelerating FLock’s mission of enabling secure, collaborative AI development.

With this funding and over 1,500 nodes contributing from platforms like Numerai and Kaggle, FLock is rapidly scaling its impact on decentralized AI training.

FLock AI revolutionizes AI development through its decentralized training framework. This approach allows participants to contribute to AI model training without ever sharing their personal data. Instead, models are trained locally across devices using federated learning, which ensures that data remains with its owners while still enhancing the accuracy of the model overall. 

FLock’s reward system is designed to incentivize active participation. Contributors who provide data, computational power and/or feedback are compensated with FLOCK tokens, ensuring a fair distribution of rewards. 

FLock empowers its community through a robust governance framework. Decisions regarding AI model development, deployment and ethical considerations are driven by the community, ensuring alignment with established societal values. Through blockchain-based voting mechanisms, contributors can influence the direction of AI projects, fostering transparency and public accountability. 

FLock’s modular architecture allows contributors to participate in specific aspects of AI model development. Whether providing raw data or computational power or even refining algorithms, the platform enables a collaborative and scalable development process. 

At the core of FLock’s philosophy is its commitment to privacy and security. By leveraging blockchain technology, the platform ensures that no single entity controls the AI development process. Data remains local and protected by cryptographic measures, while the immutability of blockchain guarantees transparency in every transaction and model update. 

 begins with a blockchain and an AI layer.

The blockchain layer underpins FLock’s incentivization and security mechanisms.

The AI layer facilitates model training, refinement and deployment, leveraging both centralized and federated approaches.

Let’s have a look at the supply and demand for the FLOCK token.

FLock adopts a 1:2 ratio model between team/investors (33.3%) and community (66.7%), prioritizing community-driven growth and ecosystem expansion. The majority of tokens are allocated to incentivize user participation and long-term ecosystem success.

FLock aims to improve the future of AI development by decentralizing the training process and ensuring transparency, privacy and inclusivity. By leveraging blockchain and federated learning, FLock empowers communities to contribute to AI creation without compromising on privacy. Its innovative reward system and community-driven governance foster a fair and collaborative ecosystem. 

With significant backing and a growing network of contributors, FLock is positioning itself as a leader in decentralized AI, offering a more ethical and secure alternative to traditional AI development models. As it continues to scale, FLock is set to transform the way AI models are built and deployed.

 — and earn a share of a 10 million FLOCK prize pool. For more details, visit 

Intermediate

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FLock AI: Decentralized AI Training

In this tutorial, we’ll explore how you can complete a series of tasks in Network3 for Bybit Web3 Airdrop Arcade.

Task 1: Register for a Network3 Account and Connect Your Bybit Wallet 

: Navigate to the campaign page and click on the 

task. Click on the task, and Galxe will ask to redirect you to the Network3 register page.

: Register for a Network3 account using your email address. You may indicate a 

Task 2: Download the Network3 App and Run a Node for One Hour

 and choose your operating system to download the Network3 app.

 or powerbutton, depending upon which operating system you’re using. For ease of reference, we’ve used macOS and iOS as examples below.

: Keep running the node until the timer reaches 

Beginner

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How to Complete Network3 Tasks for Bybit Web3 Airdrop Arcade

Bybit Learn

An NFT bubble occurs when the price for digital assets increases as the result of increased speculation among investors. Find out more about it here.

) are increasingly popular among both crypto investors and artists. Each NFT asset is completely unique, which is what creates its value. Just as with any market, however, it's possible for a bubble to form when prices become so inflated that buyers can no longer justify their purchases. When this occurs, prices can drop substantially in a short period of time as the result of insufficient numbers of buyers and a surplus of sellers. In this guide, you'll learn everything you need to know about an NFT bubble — and whether it’s already burst.

An NFT is a cryptographic asset that's positioned on a blockchain, consisting of distinct metadata and identification codes. Every NFT that's minted is thus unique, which gives the asset its value.

An NFT can't be exchanged or traded for any equivalent NFT. In comparison, cryptocurrencies and other fungible tokens can be traded for one another and used in commercial transactions. NFTs typically represent artwork,

 enables them to be traded, bought and sold efficiently. Prices for most NFT collections were at their highest in early 2021. Though prices have since dropped — after the initial surge spurred by 

 and similar NFT collections — the NFT market is still relatively healthy.

An NFT bubble occurs when the price for digital assets increases as the result of increased speculation among investors. If NFT values increase too quickly, their prices will likely crash following the initial hype.

It's common for NFT bubbles to take place when newer investors enter the market. Typically, investors will drive prices up based solely on hype, because they don’t have a thorough understanding of what they’re investing in. 

An example of a small NFT bubble took place in January 2022, when a computer science student 

, then the largest NFT marketplace. Initially listed at $3, each NFT peaked at $1,200 (the equivalent of 0.4 

 at the time), resulting in earnings of $1 million for the enterprising young man. 

Another example occurred in March 2021, when Sina Estavi, the CEO of Bridge Oracle, purchased an NFT of Jack Dorsey's first tweet. The Wall Street Journal reported that 

 for the NFT, and that he tried selling it on OpenSea for $48 million. However, most of the bids he received were in the hundreds.

As the NFTs had no utility at all, yet increased in value at such a rapid rate, this begs the question: Were these NFT bubbles? They were.

There are several signs that indicate an NFT bubble is bursting. Buying NFTs — or any type of cryptocurrency — can be risky, which is why it's highly recommended that you know the signs. The main ones to look out for include everything from NFT prices falling drastically or reduced volume, to subsiding media coverage surrounding NFT sales and the overall NFT market.

When NFT prices have begun to fall by a considerable amount, it’s the first sign that an NFT bubble is getting ready to burst. Since NFT prices tend to fluctuate, it’s wise to be cautious when you notice them dropping throughout an already highly volatile market. In addition, an NFT bubble doesn't automatically burst when prices drop; it could be a more prolonged process.

Among the most important indicators of the NFT market’s health is its daily trading volume. When trading volume drops for a lengthy period of time, it's possible that the NFT bubble is about to burst.

If people are starting to place their NFT collections on the market for sale, it may indicate a scenario where there are too many sellers and not enough buyers. In this case, it's likely that the NFT bubble will burst since there's nothing to keep their prices from decreasing.

Another sign that the NFT bubble is about to burst involves reduced NFT media coverage. When there’s plenty of news about the most popular NFT collections and sales, NFT prices are generally increasing. If media coverage begins to slacken, it’s probably a sign that the NFT bubble is getting ready to burst.

Since the peak of NFT prices in May 2022, OpenSea’s NFT market has 

, which means that the NFT bubble has burst. Keep in mind that OpenSea is 

, which is why performance on this market matters to the broader NFT industry. During May 2022, OpenSea processed more than $2.7 billion NFT transactions. At the end of August 2022, trading volume for NFT sales had dropped all the way to $9.34 million.

It's believed that the drop in NFT values is tied to the 

. However, some cryptocurrencies have begun to rebound — which might be what will happen with NFTs. While there are too many sellers and not enough buyers at the moment, the NFT market could become more balanced in coming months. Even though it's likely that the NFT bubble has burst, this doesn’t mean that prices won't increase. 

 is another popular collection of digital assets that was made available in June 2017. Developed by Matt Hall and John Watkinson, this collection consists of 10,000 unique characters that were minted for free. While the collection didn't immediately gain any traction after launch, all of the NFts quickly sold out. At the beginning, they were being sold for just a few dollars. Now, CryptoPunks NFTs are worth thousands of dollars apiece.

While the NFT market was relatively popular for several years, it wasn't until 2021 that the market exploded. During 2021, the trading volume for the year 

, which marked a 21,000% increase over the previous year.

The Bored Ape Yacht Club collection was among the most popular collections when it was released in April 2021. Its popularity was also boosted by celebrities such as Paris Hilton and Snoop Dogg when they purchased a Bored Ape NFT each. A more recent NFT collection, 

, is represented by 10,000 NFTs minted in late April 2022 at 1.5 SOL each; the floor price is 

NFT prices were steadily rising from 2021 until January 2022, when NFT sales on OpenSea were well over $4 billion in total value, their highest monthly trading volume to date. However, sales began to decrease shortly thereafter, and in February the trading volume dropped to around $3.75 billion. In March, the trading volume fell even further to $2.25 billion.

While these declines were relatively steady in the few months following January, prices throughout most of the market dropped sharply in May for NFT collections like Bored Ape Yacht Club, 

 and CryptoPunks. For instance, the Azuki NFT collection’s value dropped by nearly 50% from May 8–14. The Bored Ape Yacht Club collection experienced a 28% drop in price during the same time period. Similar drops occurred with CryptoPunks and the 

It's likely that the popularity of NFTs dropped because of market sentiments around cryptocurrencies. For instance, Bitcoin dropped from $36,000 on May 4, 2022 to just under $29,000 by May 11. This drop in NFT popularity indicates that the NFT bubble is bursting.

NFTs are almost certainly losing some of the inflated value they had in 2021 and into the beginning of 2022. However, this doesn't mean that they’re no longer valuable. To gain a better idea of why the NFTs experienced a fall in trading volume, let's take a look at the broader financial markets.

Throughout 2022, crypto values have dropped considerably as the result of the TerraUSD and LUNA market crash. In November 2021, Bitcoin was valued at $67,000 per coin. By late January 2022, its value had more than halved. While it reclaimed some of its value in the following months, further drops would occur in May and beyond. 

Meanwhile, an NFT curated by Snoop Dogg for the ETH equivalent of around $32,000 

. However, on May 3, 2022, the highest bid that the NFT received was just 0.0743 ETH, which is around $210. It's clear that these digital assets are no longer selling for what they once were.

Despite the recent drop in NFT values, the future of NFTs is promising. According to Gartner, a technological research and consulting firm, it's estimated that

 will eventually spend one hour or more every day in the 

 by 2026, and that NFTs and crypto will be the basis for the virtual economy inside the metaverse. As NFTs become more entwined in people's everyday experiences, their value should increase correspondingly.

The future of these digital assets is secured in part by the belief that 

 will become increasingly popular. Social NFTs, like social tokens, are designed to provide digital artists with the opportunity to create unique digital collectibles that represent their likenesses.

Social NFTs give content creators the means to better connect with their fans. Because of the ever-increasing popularity of social media platforms such as TikTok and Instagram, Social NFTs should also increase in popularity in the following years.

Even though the NFT bubble has likely burst, NFTs are still much more popular than they were in 2020. The meteoric growth of the NFT market has led many artists and investors to discuss the possibility of creating utility tokens with potential use cases for NFTs.

NFT tokens are inherently unique and are already being used to transform how people play and interact. Utilities for NFTs could involve rewards, owner rights or certain privileges. For instance, a thousand unique NFTs could be provided as a means of entry to a concert.

It's likely that the NFT bubble has burst. Of course, another NFT bubble can still develop in its place. While most NFTs have dropped considerably in value throughout 2022, many NFT collections of digital assets are still highly valuable. In the real estate market, prices tend to slowly increase after a bubble bursts. The same may be true following the bursting of an NFT bubble. It's entirely up to you whether you hold or sell your NFTs. Either way, we’d recommend performing sufficient research before you make a final decision.

The rapid rise in the daily average for NFT trading volumes that occurred in 2021 marked the formation of an NFT bubble that has recently burst. While the initial surge of the NFT market has since cooled, NFTs are still popular among crypto investors. Make sure you're aware of the warning signs of an impending NFT bubble burst so that you can react quickly before it does.

What Is an NFT Bubble & Has It Burst Yet?

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