The Castle Chronicle: Brutal Long Liquidations, New Fed Chair, and Reddit for AI?
PLUS: Hyperliquid making a push to take market share away from Polymarket/Kalshi?
Welcome to Edition 157 of The Castle Chronicle!
Gm all!
Welcome to the newest edition of the Chronicle!
You’ll get a curated list of the most important macro news and DeFi news, along with insightful posts from guests and more! Actionable intel done the Castle way 🤝
Without further ado, let’s get into it, shall we?
In The Markets
Anyone still alive out there?
It’s been a helluva week to say the least, as the crypto markets got turned into mincemeat over the weekend.
BTC took a tumble from 84k down to 74k, while ETH dropped to the 2100s, not to mention that alts that put in a less-than-inspiring performance.
But if you’ve been in crypto for a few years, this type of existential pain is nothing new to you. I believe the teens call this “trauma bonding”.
With price action like this, it’s no shock that everyone on CT has taken to vibe coding and AI posting.
Just look at that sea of red!
With very few tokens in the green, it’s been a brutal week for holders, unless you caught the HYPE bottom at $20.
But even with all of this violent price action, this has still been a crazy week for news!
Let’s dive into the rest of the newsletter to find out what happened!
Crypto Round-Up
Hyperliquid Is Coming For You Polymarket
Hyperliquid has been back in the headlines recently, as it has been one of the best-performing coins in the market on this recent pullback. Now, maybe that was a front run of this announcement, but it’s still big news.
Hypercore will be supporting HIP-4: Outcome Trading. Outcomes are defined as “collateralised contracts that settle within a fixed range”.
The TLDR is that they can be used for prediction markets and options instruments. The interesting thing here is how these two pieces will interact with other Hyperliquid primitives, such as portfolio margin and the HyperEVM.
One of the biggest advantages Hyperliquid has over Polymarket/Kalshi is its oracle. It will allow them to support markets that others can’t, while bringing counterparty guarantees.
Overall, it’s a significant development for Hyperliquid and should enable new experiments/collaborations with HyperEVM ecosystem projects.
If you’re interested in the implications of this and what to look forward to, read our newest article on the subject!
AI Is Here and It Is Real
Alright, can we officially say that AI is getting uncomfortably weird?
It seems as if every movie and sci-fi trope is coming true at an increasing rate, and this past week, we saw the rise of Open Claw (previously known as Clawd) and Moltbook.
Open Claw should be fairly familiar, as it’s the reason everyone and their grandmothers went out and bought Mac Minis, so they can have their very own personal assistant.
Moltbook brought the crazy, becoming the Reddit for AI Agents. These agents are posting, discussing, and interacting on an online forum in real time.
There has been some discussion around whether or not all these agents are, in fact, AI and not controlled by a human hand, but even with that, having agents interacting all the time in a forum setting is crazy to watch.
If anything, it’s a direct look into an agentic future – where users can give their agents directions and then trust they will get them done without supervision.
A sneaky play to speculate on this trend could be $BNKR or Bankr Bot. Bankr is essentially an AI-powered financial operations layer, where AI agents can fund themselves.
With mentions going up to the right, we’ll have to see if Bankr continues to gain traction from these agents.
The future is here, ladies and gentlemen. Hope you’re ready.
If you want another great primer on this entire movement, 0xSammy has an excellent post here:
The Stablecoin Trilemma
Stablecoins are very obviously one of crypto’s greatest creations, and will only continue to grow from here. The US government is leveraging stablecoins to increase demand for US treasuries, while other countries facing inflation use them for transactions and to safely store money.
But stablecoins typically have to choose a path: offer more yield, stay firmly onchain, or continue to scale up – all of which come with their own drawbacks.
That’s why Polaris was created as a solution. Polaris capitalises on a part of crypto that is typically seen as a problem: volatility.
Using a bonding curve mechanism, they monetise volatility to make a sustainable yield source. Polaris runs on a 3-token system:
pUSD - The yield-bearing stablecoin
pETH - ETH derivative with a rising price floor
POLAR - the protocol’s governance token with real yield
What’s interesting here is that the yield from both pUSD/pETH doesn’t dilute as TVL increases, like other tokens. The activity is internalised as yield, meaning that as adoption grows, so does the activity and yield.
In a world where decentralised, fully immutable stablecoins are at a premium, Polaris has chosen the path less travelled, being fully onchain, immutable, and auditable.
They are also marketing Polaris as a StablecoinOS, where the pETH structure is forkable for any asset, including pGOLD and others.
This is how DeFi wins, and it’s great to see more projects move down this path of true immutability.
Schizo’s Solitary Confinement
Man, it really seems like we can’t catch a break in the markets, can we?
It’s like every time I wake up, we’ve nuked another 5% and the sentiment of the people continues to drift further and further towards hell. If this is your first experience with crypto, my deepest apologies, but this is your trial by fire.
The majority of us who have been in the space for an extended amount of time have been through this style of market time and time again. There is one big difference, however.
There has never been this much adoption in crypto, ever. You can debate on whether or not governmental involvement is good, and that we’ve strayed from our cypherpunk roots, but no one can deny that crypto is becoming more and more entrenched in the future of finance.
This is undeniably bullish, and it should be exciting!
But the prices aren’t aligning, why not?
Well, there are likely a number of reasons, different speculations, and who knows what else to justify the price moving down. But none of it is in our control.
This is where people tend to give up; this is the period of the cycle where people move on, as they’re not getting their 100xs anymore. It is a more challenging market to invest in than people have been used to over the past few years.
I see it as an evolution for crypto, a realignment on a new path. Crypto has always been a shifting, ever-changing beast that never seemed to cement itself as any one thing – so we’ve tried as many different paths as possible, from DeFi, to memecoin casinos, to stablecoins, to hundreds of different chains, etc.
But I think we’re finally narrowing down our list.
I think DeFi, AI Agent payment infrastructure, and stablecoins will continue to win out as crypto rails are built for these use cases. But with that change, it means all the others will slowly die out and become irrelevant, or at least that’s what I hope.
While it sucks that price go down, there are a number of diamonds in the rough that are at supremely depressed valuations just begging to be accumulated.
If you have the capital, start researching and identify projects worth DCAing into. I think the time is likely now, and I’ve been doing the same thing.
Because once that’s done, it’s time to sit back and relax and ignore the charts. Let the market come back naturally; it always does.
May we forever have the Mandate of Heaven.
Schizo out!
In The Know: News, Headlines, and What to Watch For
N1 is launching their mainnet today, Feb 3rd. To see why this could be a big deal, check out this article we wrote on the subject (especially Tolkien fans).
Macro is very clearly in control for all markets, and the recent spike in metals has proved that people are getting spooked. This is another great video by the Forward Guidance team about what to expect as far as cuts go and what Trump wants vs what we’re getting
Trump made his pick for the new Fed Chair, choosing Kevin Warsh to replace Jerome Powell. Warsh caused some panic in the markets as people think he will be too hawkish (although the odds that Trump picked someone he couldn’t control/influence seem small), but we will have to see what he actually does when he takes the seat.
Arcium just announced their Mainnet Alpha has just gone live. In a world where privacy protocols are getting more attention than ever, Arcium is one to watch. Umbra is the first project to go live on the network with more expected to launch and build out these Encrypted Capital Markets.
That’s it for another edition of the Chronicle! Every week brings new opportunities, so don’t fret!
We’re all gonna make it eventually!
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In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.
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