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AI rout hits software stocks, but Grayscale says blockchains stand to benefit

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Why machine-to-machine payments are the new electricity for the digital age

Blockchains and artificial intelligence are complementary technologies, according to crypto asset manager Grayscale, even as markets have recently treated them as part of the same trade.

Zach Pandl, Grayscale’s head of research, said that while disruptive technologies tend to produce clear winners and losers, the relationship between AI and blockchain is more symbiotic than competitive. Rapid AI adoption is expected to reward some industries, such as chipmakers, while pressuring others, including segments of professional services.

“Although crypto valuations have been tightly correlated with the drawdown in software stocks, we think blockchains and AI are complementary from a fundamental standpoint,” he said in the Wednesday blog post.

U.S. equity markets have lately focused on the downside. The S&P 500 software index has fallen roughly 20% year to date, and crypto valuations have moved closely with the selloff. But Pandl maintains that the parallel drawdown obscures a more constructive long-term dynamic between the two technologies.

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Investor anxiety about artificial intelligence’s disruptive potential has sparked a broad sell-off in tech and software stocks, erasing significant market value as traders reassess long-held valuations.

U.S. software and services shares have plunged sharply, wiping out roughly $1 trillion in market capitalization, as fears mount that fast-advancing AI tools could upend traditional business models and revenue streams.

The S&P 500 software index has slumped as investors rotate out of high-flight tech names amid heightened volatility and skepticism over how quickly and profitably AI adoption will play out.

Pandl contends that blockchains are likely to become the financial rails for AI agents. Today’s chatbots operate largely outside the financial system. But if AI agents are equipped with digital wallets, he expects them to transact over blockchains rather than traditional bank infrastructure.

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Blockchains offer transparency, near-instant settlement, 24/7 availability and global reach with an internet connection, he said. While opening a bank account requires a human intermediary, any user, including a bot, can create a blockchain address. Pandl said rising volumes of low-value stablecoin transactions would be an early signal that this thesis is playing out.

At the same time, he argued that blockchain technology could help mitigate some of AI’s risks. As large language models proliferate, concerns around data provenance, deepfakes and the concentration of control over resources and decision-making are likely to intensify. Public blockchains, Pandl said, can provide verifiable records and more decentralized infrastructure to counterbalance those trends.

The report acknowledged AI may also introduce new challenges for crypto networks. Advanced tools could make blockchain surveillance more effective, potentially eroding user privacy. AI agents may also uncover new vulnerabilities in smart contracts; OpenAI recently launched EVMbench, an initiative aimed at using AI to identify and patch such risks.

Read more: Crypto isn’t losing to AI, its just ‘capitalism doing its job,’ says Dragonfly

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STRK price outlook as Starknet prepares to launch strkBTC, a shielded Bitcoin for private transactions

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AAVE price risks fresh plunge under $100, bears eye 2-year lows
  • strkBTC will enable private Bitcoin transactions on Starknet’s DeFi network.
  • STRK is down nearly 70% in 90 days, closely tracking Bitcoin’s movements.
  • The key STRK price levels to watch are the support at $0.04 and the resistance at $0.045.

Starknet is gearing up for a major move in the decentralised finance (DeFi) space with the upcoming launch of strkBTC, a Bitcoin-based asset designed to bring privacy and confidentiality to transactions on its Layer-2 network.

According to a press release by Starknet, the new asset will allow users to transact Bitcoin within DeFi without exposing balances or counterparties.

It is built with shielded transfers in mind, giving users the flexibility to maintain privacy while interacting with the DeFi ecosystem.

strkBTC will be issued deterministically from verifiable Bitcoin deposits, meaning that the minting process does not rely on discretionary control.

This ensures that the token’s supply mirrors actual Bitcoin deposits on the network, creating a transparent and verifiable foundation for its use.

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Users can choose between public and shielded modes, enabling confidential transactions while still preserving regulatory compliance.

This is achieved through selective disclosure mechanisms, which allow necessary audits without exposing the broader network activity.

The launch of strkBTC is part of Starknet’s strategy to increase Bitcoin adoption in DeFi while addressing concerns that have historically held back institutional participation.

By combining privacy, composability, and auditability, Starknet aims to attract both retail and institutional users to its ecosystem.

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Starknet (STRK) market reaction

Starknet’s native token, STRK, has been under significant pressure in recent months.

The token has dropped roughly 70% over the past 90 days, reflecting a broader trend in cryptocurrency markets.

Its current price sits near $0.042, with a 24-hour decline of over 8%.

However, market activity remains moderate, with a 24-hour trading volume of around $52 million and a total value locked (TVL) on the network of roughly $446 million.

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The upcoming strkBTC launch may provide a catalyst for renewed interest.

The introduction of a privacy-focused Bitcoin asset could enhance the utility of the Starknet network and increase demand for STRK as a governance and utility token.

In addition, STRK’s performance is closely tied to Bitcoin’s price movements, and the stabilisation of BTC above $66,000 could help STRK consolidate in the range of $0.04 to $0.045.

On the other hand, a sustained move below $0.04 may see the STRK token test the $0.035 support zone.

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Investors should also keep an eye on broader market sentiment indicators, such as the Fear & Greed Index.

Historically, movements out of extreme fear have preceded market rebounds, suggesting that even in a downtrend, relief rallies are possible.

STRK price forecast

Starknet (STRK) remains in a cautious position, with short-term consolidation possible, although long-term direction is dependent on broader crypto market recovery and the success of strkBTC’s adoption within Starknet’s DeFi ecosystem.

The launch of strkBTC adds an important layer of fundamental support for STRK, as the token’s utility within the network is set to increase.

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For short-term traders, the key levels to watch include the immediate support at $0.04 and the resistance at $0.045.

A break above $0.045 could signal the start of a more sustained recovery, especially if Bitcoin shows strength simultaneously.

Conversely, a drop below $0.04 would likely signal further downside toward $0.035, continuing the current bearish trend.

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Why Retail Is Moving From Crypto To Stock: Will They Comeback?

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Why Retail Is Moving From Crypto To Stock: Will They Comeback?

Retail activity in crypto fell off a cliff, and it seems they are moving elsewhere.

Spot volumes are down 25% to 30%, and Estimated Leverage Ratios have dropped 28%. This looks like capitulation, coming four months after Bitcoin topped at $126,000 and slid 46%.

Capital is rotating hard into equities. The old “buy the dip” reflex that defined the 2024–2025 run is fading. Liquidity on major exchanges is thinning, and instead of moving with tech stocks, crypto is starting to lose capital to them as traders choose stability over volatility.

Key Takeaways

  • The Signal: Leverage Flushed: Estimated Leverage Ratios (ELR) plummeted from 0.1980 to 0.1414, wiping out speculative froth.
  • The Data: Equities Rotation: Retail traders hit all-time high net inflows of $650 million into stocks and options in January 2026.
  • The Outlook: Sideways Summer: Analysts predict range-bound action through mid-2026 as retail capital remains sidelined.

The Data Behind the Retail Crypto Liquidity Drain

The data is clear. The speculative engine has stalled. Estimated Leverage Ratios dropped 28%, sliding from 0.1980 to 0.1414.

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Source: CryptoQuant

Binance activity fell by about $4.71 billion, down 16.4%, with daily volume now near $24 billion. Without heavy retail participation, rebounds are weak and short-lived. Price is leaning on passive institutional flows rather than aggressive speculation.

The “digital gold” hype has cooled among short-term traders. After the fall from $126,000, fewer participants are willing to catch dips. The leverage reset suggests the high-risk crowd that drove the 2025 rally has either been liquidated or stepped aside.

People Are Moving From Crypto To Stocks

Retail is not moving to cash. It is moving to stocks.

In January 2026 alone, retail traders funneled $350 million into cash equities and more than $300 million into options. That is record flow. The shift is clear.

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Source: Wintermute

The BTC-to-Nasdaq volatility ratio has dropped below 2x. Stocks now offer comparable volatility with far smaller drawdowns. After a 46% Bitcoin correction, that trade-off looks rational to burned traders.

Institutions are still active in crypto through ETFs, but they provide floors, not frenzy. They accumulate quietly. They do not create viral rallies.

Meanwhile, the speculative energy has rotated to AI-driven equity names. Traders are using language models to dissect earnings and hunt for an edge in stocks. Compared to that, crypto currently looks opaque and momentum-starved.

Until retail risk appetite swings back, crypto is missing the explosive buy-side pressure that once fueled vertical moves.

Discover: Here are the crypto likely to explode!

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ZachXBT accuses Axiom employees of insider trading

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Ethereum address poisoning crypto users $62M in two months: ScamSniffer

A new investigation claims that employees at crypto trading platform Axiom abused internal tools to access private user data and profit from insider trading.

Summary

  • ZachXBT released a report accusing Axiom Exchange employees of misusing internal tools to track private wallets.
  • The investigation linked leaked dashboards, recorded calls, and on-chain data to alleged insider trading and coordinated memecoin activity.
  • Unusual betting on Polymarket before the reveal raised further questions about information leaks and market manipulation.

On Feb. 26, blockchain investigator ZachXBT published a detailed report on X accusing staff at Axiom Exchange of misusing internal dashboards to track private wallets and trade ahead of users.

According to the report, one of the main figures involved was Broox Bauer, known online as @WheresBroox, a senior business development employee based in New York. ZachXBT said Bauer had access to internal systems that allowed him to search users by referral code, wallet address, or user ID.

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Internal tools allegedly used to track private wallets

Recordings and leaked screenshots reviewed by the investigator show Bauer discussing how he researched 10 to 20 wallets at first and expanded gradually to avoid detection. In one clip, he claimed he could “find out anything” about an Axiom user.

In another, he outlined rules for requesting lookups and offered to share full wallet lists.

Screenshots from April and August 2025 allegedly showed internal dashboards displaying private wallet connections for traders identified as “Jerry” and “Monix.” Bauer also discussed tracking users who traded the memecoin AURA.

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ZachXBT said the group compiled this information into Google Sheets, mapping wallet addresses linked to prominent traders and influencers. Several of those named reportedly confirmed that the data matched their private wallets.

One targeted trader, Marcell, was known for accumulating large token supplies before promoting projects to followers. Investigators said such traders were attractive targets because their private wallets were rarely public, making internal data especially valuable.

On-chain analysis linked Bauer’s main wallet and related addresses to heavy memecoin trading. Funds were traced to multiple centralized exchange deposit wallets, although ZachXBT noted that confirming exact insider trades would require Axiom’s internal logs.

The report also mentioned other employees and associates, including Ryan (Ryucio), Gowno (Seb), and a moderator known as Mystery, as being involved in or aware of lookup activity.

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Axiom was founded in 2024 and later joined Y Combinator’s Winter 2025 batch. ZachXBT said the company had generated more than $390 million in revenue to date.

Polymarket bettors realize huge profits

The investigation also triggered unusual activity on Polymarket, where users had previously bet on which company would be exposed. In the days before the report, the market saw more than $23 million in volume.

Two wallets reportedly placed nearly $60,000 in bets on Axiom just hours before the reveal and earned about $109,000, according to data shared by Lookonchain. “Insiders making money on a bet about insider trading — interesting,” Lookonchain remarked.

Another trader, “predictorxyz,” wagered $65,800 when odds were below 14% and later made more than $411,000. Some analysts suggested these trades may have relied on non-public information.

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Following the report, Axiom released a statement saying it was “shocked and disappointed” by the alleged misuse of internal tools. The company said it had removed access to the systems involved and launched an internal investigation.

ZachXBT criticized Axiom for weak access controls, noting that business development staff could view full wallet histories, nicknames, and linked accounts. He added that the case may fall under the jurisdiction of the Southern District of New York because Bauer is based in New York.

Whether criminal charges follow remains unclear. However, the report has renewed concerns about employee oversight, data security, and insider risk within fast-growing crypto platforms.

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Will crypto market dip as USDT exchange reserves decline?

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Will crypto market dip as USDT exchange reserves decline?

The crypto market has faced sustained pressure in February, with prices struggling to build momentum amid declining stablecoin exchange reserves.

Summary

  • CryptoQuant reports USDT reserves fell from $60B to $51.1B in two months, reducing market liquidity.
  • Daily trading volumes are modest and active on-chain wallets have been declining.
  • Analysts are split: VanEck calls it orderly deleveraging, while others warn of deeper losses if support breaks.

Bitcoin (BTC) has dropped by nearly 50% from its peak in October 2025 and by roughly 30% since the year began. Alongside the decline, there has been slower stablecoin growth, cautious interest rate signals from the Federal Reserve, and weaker U.S. manufacturing data.

Total market capitalization has fallen to around $2.3 trillion. At the same time, the Fear and Greed Index has slipped to cycle lows. Continued exchange-traded fund outflows have added to investor caution and reduced fresh capital entering the market.

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Liquidity drain raises downside risks

On Feb. 26, CryptoQuant analyst TopNotchYJ warned that shrinking stablecoin reserves are becoming a major risk factor. Data shows that Tether (USDT) exchange balances fell from $60 billion to $51.1 billion in two months, a $9 billion decline that has tightened trading liquidity since January.

TopNotchYJ described the drop in USDT reserves as clear evidence of capital moving out of crypto markets. Stablecoins are the main source of trading activity, and falling balances usually signify a drop in investor confidence. Moving below $50 might put more selling pressure on major assets like XRP, ETH, and BTC. 

The number of active wallet addresses has also rapidly decreased, from about 376,000 to 263,000. This shows that retail investors and institutional investors are taking a backseat. Price rebounds typically lose strength when there are fewer market participants, as demand naturally softens.

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A similar pattern is visible in trading behavior. The daily volume has dropped by more than 6% to roughly $339 million. This indicates little speculative activity in the market, but it does not suggest widespread panic selling. 

Short-term outlook and analyst views

Analysts remain divided, although most expect high volatility in the near term. Some warn that Bitcoin could slide another 20% to 30% if economic pressure continues, especially if support near $60,000 breaks. The $70,000 level continues to act as a major barrier to recovery.

Matthew Sigel of VanEck has described the recent decline as “orderly deleveraging.” He argues that leverage has cooled and that the market is adjusting rather than entering a full collapse.

Researchers at K33 Research see parallels with the late-2022 bottom. They point to fragile economic conditions and stagnant stablecoin supply as limits on short-term upside.

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More positive views come from Bitwise Asset Management, which manages more than $15 billion. Their analysts continue to highlight Bitcoin’s long-term potential and see recent pullbacks as possible accumulation opportunities.

Several technical levels remain are now in focus. Support lies between $64,000 and $66,000, followed by $60,000 and the $50,000–$55,000 zone. Resistance is clustered near $70,000 and $80,000.

Until stablecoin reserves recover and user activity improves, analysts expect the market to stay vulnerable, with downside risks likely to persist in the coming weeks.

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US Lawmakers Introduce Bill to Protect Blockchain Devs from Prosecution

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Law, Politics, Congress, Crimes, Developers

A bipartisan group of lawmakers in the US House of Representatives has introduced legislation aimed at halting prosecution of software developers who do not have custody or control of others’ crypto assets.

In a Thursday notice, Representatives Scott Fitzgerald, Ben Cline and Zoe Lofgren said that they would be sponsoring the Promoting Innovation in Blockchain Development Act in an effort to change how to handle criminal cases potentially involving blockchain developers.

The bill would clarify that Section 1960 under US federal law, on the “prohibition of illegal money transmitting businesses,” would apply only to actors with control of others’ digital assets.

At least two crypto advocacy organizations publicly supported the bill. The Blockchain Association called it a “critical step” to encourage US-based developers. The DeFi Education Fund (DEF) said the legislation would likely put a stop to prosecutions similar to those of Tornado Cash developer Roman Storm or the creators of the Samourai Wallet. 

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“[The bill] makes it clear software developers who do not take custody of or control other people’s money can build neutral technology, here at home, without worrying about being criminally prosecuted as if they are a financial intermediary,” said DEF.

Law, Politics, Congress, Crimes, Developers
Source: DeFi Education Fund

It’s unclear whether the bill, if signed into law, would put a stop to previously filed cases against developers. Storm was found guilty of running an unlicensed money transmitter business in August 2025, while Samourai Wallet founders Keonne Rodriguez and Will Lonergan Hill pleaded guilty to similar charges in July and were later sentenced to five and four years in prison, respectively.

Related: US ‘crypto capital’ claim tested by developer prosecutions

As of Thursday, Storm had yet to be sentenced or face a possible retrial for two other charges.

US Senate to potentially address blockchain bill

Lawmakers in the US Senate have already pitched their own bill for developer protection. In January, Senators Cynthia Lummis and Ron Wyden introduced the Blockchain Regulatory Certainty Act, to clarify that developers writing code or maintaining networks don’t meet the requirements for being criminally liable as an unlicensed money transmitter.

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In the meantime, the Senate has been considering how to move forward with a comprehensive digital asset market structure bill sent from the House in July 2025.

The CLARITY Act passed the Senate Agriculture Committee in January, but has yet to be addressed with a markup in the Senate Banking Committee. It’s unclear whether the final bill potentially passed by the full chamber could address developer protections, which face pushback from some lawmakers.

Magazine: Clarity Act risks repeat of Europe’s mistakes, crypto lawyer warns

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