Bitcoin holds above $96,000 while investors turn to AI and DeFi tokens for growth opportunities

Bitcoin has maintained its position above the $96,000 mark on Friday, trading mostly flat over the past 24 hours, according to The Block's price page. The largest digital asset by market capitalization remains in a consolidation phase following its recent price correction from a record high of over $108,000 in mid-December, analysts said.

ETF inflows signal institutional confidence

Bitcoin exchange-traded funds (ETFs) recorded $475 million in inflows on Thursday, reversing a four-day streak of outflows that occurred in the run up to Christmas Day. Ethereum ETFs also saw inflows totaling $89 million, according to Farside Investors.

This resurgence in institutional interest underscores the growing confidence for digital assets at current price levels, despite the recent failure for bitcoin to break back above the psychological $100,000 mark, several analysts said.

"The ETF inflows highlight robust institutional support, particularly as macroeconomic conditions improve and inflation appears to be easing,” BRN lead analyst Valentin Fourner said in an email sent to The Block.

U.S. core PCE data released last Friday showed inflation slowing, with increases of 0.1% month-over-month and 2.8% year-over-year that were both slightly below expectations. “These figures suggest inflation is trending toward the Federal Reserve’s 2% target, creating a more favorable environment for risk assets like bitcoin,” Fourner said.

Broader market trends and emerging narratives

The recent correction in bitcoin’s price has pushed some investors to explore alternative crypto assets and emerging narratives in the digital asset space, according to an analyst. “AI-driven investments and high-performance DeFi platforms are gaining traction as the next frontier for growth," Bitget chief analyst Ryan Lee told The Block.

One notable example is HyperLiquid’s HYPE token, which has surged over 15% in the past 24 hours, according to CoinGecko data. Another is AI-driven venture capital DAO token ai16z, which increased by 8% during the same period. "Ai16z, which merges AI with blockchain technology, is expected to see notable growth by 2025 and HyperLiquid, focused on high-performance DeFi, has the potential to reach values between $25 and $40 under favorable market conditions in 2025," Lee said.

Ai16z’s “Eliza” AI, named after one of the earliest AI chatbots developed in the 1960s, plays a central role in its ecosystem. Eliza is used to create AI versions of "real" people (dead or alive) and fictional characters. For instance, ai16z's community features a version of Andreessen Horowitz founder Marc Andreessen, called pmairca. Others include versions of crypto trader Degen Spartan and Star Wars' Darth Vadar.

Risks and opportunities

While the market conditions surrounding emerging technologies and decentralized platforms present exciting opportunities for investors, a strengthening U.S. dollar has added pressure on digital asset prices, YouHodler chief of markets Ruslan Lienkha said.

"Higher rates for an extended period make bonds and U.S. Treasurys more attractive for international capital and boost the value of the U.S. dollar," Lienkha told The Block. "Conversely, higher rates reduce the available capital for risky assets like Bitcoin, leading to diminished inflows — or even net outflows — from the cryptocurrency market."

That said, despite bitcoin’s recent pullback, many analysts remain optimistic about its medium- to long-term prospects. Strong support levels around $95,000, coupled with institutional activity and potential pro-crypto policies in early 2025, provide a bullish backdrop, Lee noted. 

"These developments highlight a shift toward technologically advanced and innovative crypto investments, though they come with heightened risk," Lee noted. “We recommend using small dips to strengthen exposure to bitcoin and ether."