Crypto’s Long, Hard Fall This Winter

Summary of Crypto’s Long, Hard Fall This Winter

by The Wall Street Journal

14m•February 5, 2026
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Overview of Crypto’s Long, Hard Fall This Winter

This episode of The Wall Street Journal’s PM edition (host Alex Osoloff) covers major market and political headlines: big tech’s surge in AI capital spending, mixed investor reactions, weakening U.S. labor-market signals, Bitcoin’s recent decline and broader crypto malaise, a called-off mining merger, and fallout from newly released Jeffrey Epstein files that toppled the chair of a leading U.S. law firm and pressured U.K. politics.

Key headlines (quick summary)

  • Big tech AI capex: Meta plans up to $135B in capital expenditures; Alphabet (Google) up to $185B—most spending aimed at AI infrastructure (chips, servers). Amazon flagged higher AI-related spend, forecasting $200B CapEx in 2026.
  • Labor market: Official January jobs report delayed by a government shutdown; other indicators point to a weaker start to the year (job openings at lowest since 2020; layoffs and job cuts elevated).
  • Markets: Major indexes fell >1% (Nasdaq -1.6%). Bitcoin fell below $64,000—its lowest since October 2024—after a post-record decline.
  • M&A: Rio Tinto abandoned talks to merge with Glencore; deal would have formed the world’s largest miner.
  • Epstein files fallout: Brad Karp resigned as chair of Paul Weiss after new Epstein-related emails; UK political fallout for PM Keir Starmer over appointment of Peter Mandelson amid related disclosures.
  • International policy: President Trump said he wants a new strategic arms treaty with Russia; China not included and has refused to join such talks so far.

AI spending: What’s happening and why it matters

  • What companies announced:
    • Meta: up to $135 billion CapEx planned this year.
    • Alphabet: up to $185 billion CapEx planned (roughly double prior year).
    • Amazon: said sales rose and flagged $200 billion CapEx expected in 2026.
  • Where money goes:
    • Majority is for AI infrastructure—chips, servers, and data-center capacity to run large models and services.
  • Why it matters:
    • Competitive race to capture AI users and market share (e.g., Google’s Gemini vs. OpenAI).
    • Investor reaction is mixed: some reward strong results despite high CapEx (Meta), others worry CapEx will weigh on returns (Alphabet). Day-to-day market sentiment matters.

Notable quote (Dan Gallagher): “The bulk of it goes to essentially the AI infrastructure... specifically the chips and the servers to power that.”

Labor-market signals and market impact

  • Delayed official January jobs report (released next week).
  • Alternative indicators:
    • Job openings fell in December to the lowest level since 2020.
    • Reveglio Labs estimate: U.S. lost >13,000 jobs in January.
    • Challenger Gray & Christmas: employers announced >108,000 job cuts in January (highest January total in >10 years).
  • Market reaction: Concerns about labor health and tech-sector weakness contributed to >1% declines in major indexes.

Crypto: Why Bitcoin and crypto are weak now

  • Short-term picture:
    • Bitcoin has been in a bear market since late last year; liquidity is thin and demand from retail and institutions is softer.
    • Investors rotating out of tech stocks appear to be rotating out of Bitcoin as well.
    • Geopolitical and macro uncertainties have added pressure.
  • How investors think about Bitcoin:
    • Industry pitches it as “digital gold” or an inflation hedge, but behavior has been more like a highly leveraged, volatile tech/speculative asset.
    • It has not consistently acted as a hedge and recently underperformed gold.
  • Path to recovery:
    • Unlike prior crypto winters triggered by scandals or exchange hacks, this downturn lacks a single flashpoint.
    • Some believe continued Wall Street adoption (e.g., Fidelity stablecoin, new funds) could slowly revive markets—but recovery could take one to two years.

Notable quote (Vicky Gauhuang): “Bitcoin has actually been a bear market since late last year... it has not acted like a hedge against inflation and has underperformed gold.”

Epstein files fallout: Legal and political consequences

  • Paul Weiss:
    • Brad Karp resigned as chair after newly released emails showing interactions with Jeffrey Epstein (dinners, discussions about plea agreements, requests for a job for Epstein’s son).
    • Karp will remain a partner; Scott Barche (corporate leader at Paul Weiss) will take the chair role.
    • Firm and Karp deny any participation in misconduct; partners decided resignation was best for the firm’s interests.
  • U.K. politics:
    • Newly released files implicated Peter Mandelson; he had been appointed ambassador to Washington by PM Keir Starmer (who’d previously fired Mandelson after earlier email revelations).
    • Emails suggest Mandelson shared Epstein information that could be market-sensitive; British police are investigating whether laws were broken.
    • The revelations are politically damaging for Starmer.

Notable quote (Erin Mulvaney): Karp’s reputation was as “a very charismatic, dynamic leader” who transformed Paul Weiss into a premier M&A and litigation firm.

Takeaways and implications

  • AI buildout is the dominant corporate narrative for 2026 CapEx—expect sustained heavy investment in chips and data-center infrastructure; investor responses will depend on execution and near-term results.
  • Early 2026 labor indicators point to cooling in the U.S. jobs market, which could pressure stocks and risk assets.
  • Crypto remains in a liquidity-driven down cycle; absent a fresh positive catalyst or sustained institutional demand, recovery may be slow.
  • High-profile reputational fallout from the Epstein file releases continues to shift leadership and create political risk in both the U.S. and U.K.

Suggested actions (for investors and observers)

  • Monitor company-level AI execution metrics (user adoption of AI features, cloud/AI revenue growth) to assess whether CapEx is translating into durable returns.
  • Watch upcoming official labor reports and corporate layoff announcements for clearer direction on the economy and risk appetite.
  • If exposed to crypto, consider liquidity and time horizon—the market may remain volatile and recovery could be prolonged.
  • Follow legal and political developments from the Epstein files for potential regulatory, reputational, or governance implications at affected firms and public offices.