The past week was eventful for both the crypto market and related technology sectors. Bitcoin, despite volatility, managed to hold above $64,000, while the release of a new AI model, Kimi K3 from China's Moonshot AI, triggered a massive sell-off in semiconductor manufacturer stocks. We analyze the key events and their impact on the market.
Bitcoin: From Correction to Consolidation
The week began with profit-taking: amid escalating geopolitical tensions between the US and Iran, as well as general macroeconomic uncertainty, the first cryptocurrency corrected to $61,000. However, on July 14, the situation changed dramatically. The release of US Consumer Price Index (CPI) data showed a slowdown in core inflation to 2.6% annually, which was below forecasts of 2.8%. This became a powerful catalyst for growth.
Additional support came from the positive rhetoric of Fed Chairman Kevin Warsh during his speech before Congress. As a result, on the evening of July 15, Bitcoin reached a local high of $65,500, after which it entered a consolidation phase. On Friday, July 17, the market came under pressure again due to the crisis in the semiconductor industry, but by the weekend the asset managed to recover. At the time of writing this review, Bitcoin is trading around $64,500, showing a weekly gain of approximately 1%.
Assets in the top 10 by market capitalization showed mixed dynamics: Ethereum strengthened by 4% to $1,850, while HYPE lost about 8%. Inflows into spot Bitcoin ETFs amounted to $75.5 million for the week, marking the second consecutive "green" week. Ethereum funds also attracted $105.5 million. Despite this, the Fear and Greed Index remains in the "fear" zone at 28 points, indicating continued investor caution.
Political Pressure and Regulation
US Democratic Senators Chris Murphy, Jeff Merkley, and Chris Van Hollen issued sharp criticism of the CLARITY Act, which aims to delineate the powers of the SEC and CFTC in regulating digital assets. In their view, the current version of the document lacks anti-corruption provisions, creating risks of conflicts of interest, especially given the cryptocurrency business of President Donald Trump and his family.
The senators propose including provisions in the bill that would prohibit the president, vice president, cabinet members, congressmen, and their immediate relatives from owning or profiting from a crypto business. Consideration of the proposal is expected from July 20, and its adoption would require 60 votes in the Senate. This event could significantly impact the future dynamics of industry regulation in the US.
BIP-110: An Initiative That Found No Support
The Bitcoin improvement proposal BIP-110, aimed at limiting non-payment data in transactions, faced complete disregard from miners. Over two weeks, no major mining pool signaled support, and the overall adoption rate barely reached 1% against the required 55%. The initiative was criticized by Strategy founder Michael Saylor and Blockstream co-founder Adam Back.
In contrast to BIP-110, a developer under the pseudonym Leonidas introduced the DOG Mode client, which increases the transaction limit from 400,000 to 3.9 million WU and reduces the "dust limit" to 1 satoshi. This solution, unlike BIP-110, does not require a majority vote and is aimed at simplifying the sending of Ordinals and Runes. The situation clearly demonstrates the split within the community over scaling and use of the Bitcoin network.
AI Revolution: Kimi K3 vs. the Chip Market
China's Moonshot AI unveiled the largest open-source AI model, Kimi K3, with 2.8 trillion parameters. Built on the Stable LatentMoE architecture, the model shows impressive results, trailing in overall benchmark scores only behind the proprietary Claude Fable 5 and GPT 5.6 Sol. It can conduct long engineering sessions, navigate large repositories, and even independently designed a chip for a neural network.
However, the launch of Kimi K3 sparked panic in stock markets. On July 17, shares of chip manufacturers and AI companies crashed worldwide. The Taiwan index lost over 6%, the Japanese index fell 4%, and the Nasdaq dropped 1.5%. Shares of Chinese developer Z.ai plummeted nearly 30% in Hong Kong. Investors draw parallels with the "DeepSeek effect" in January 2025, when the release of the R1 model led to a $590 billion loss in Nvidia's market capitalization in a single session.
My analysis: The market is clearly overheated with expectations, and any significant breakthrough in open-source AI causes panic among investors in chipmakers, who fear a decline in demand for their expensive proprietary solutions. However, for the crypto market, this could be a long-term positive factor, as the development of decentralized AI computing and tokenized computing power will gain new momentum. In the short term, increased volatility should be expected, especially for projects related to AI and infrastructure.