Crypto’s Long, Hard Fall This Winter

0:00Isn't home where we all want to be? Reba here for Realtor.com. The pros number one most trusted app. Finding a home is like dating. You're searching for the one. With over 500 ,000 new listings every month, you can find the one today. Download the Realtor.com app because you're nearly home. Make it real with Realtor.com. Pros, number one most trusted app based on August 2025 proprietary survey. Over 500 ,000 new listings every month based on average new for sale and rental listings. July 2024 to June 2025.

0:33Bitcoin hits its lowest price in more than a year. What's driving its fall? That's the narrative that it's supposed to be this digital gold, that it would perform better than gold. But the reality is that it just has not acted like a hedge against inflation and has underperformed gold. Plus, big tech companies like Google and Meta plan to spend billions on AI this year. Investors are having mixed feelings. And the latest batch of Epstein files shakes up UK politics and an elite US law firm. It's Thursday, February 5th. I'm Alex Osolov for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

1:18Big tech companies are announcing big AI spending plans. Meta said last week that it would spend up to$135 billion on capital expenditures this year. And yesterday, Google parent Alphabet said it was planning to spend as much as$185 billion, about double, last year. Investors have their doubts. WSJ Heard on the Street columnist Dan Gallagher joins me now with more. Dan, I just laid out these eye-popping numbers for CapEx spending this year. Is it all going to the building out of AI? Well, most of it is, yes. Especially with Google and what they said on their earnings call is like, yeah, the bulk of it goes to essentially the AI infrastructure.

1:58And a lot of it goes to specifically the chips and the servers to power that. Why do these companies feel the need to do this? What is the competitive pressure here? They're in a race to build up AI services, get as much market share, getting users really accustomed to their AI platforms. So for Google, you know, they have Gemini. Gemini competes with ChatGPT and Claude and these other kind of AI models. Google wants as many users as it can using Gemini. So they're going to build and invest in that because you need the AI infrastructure to power that and to grow the services. So how are investors responding to the announcements of all this spending?

2:40I mean, obviously, there's been some investor concern about AI spending overall over the past few months. But as you said, it could be critical to some of these companies' central functions. So what's the verdict there? Honestly, it's mixed because it depends on the day you ask that question. We saw last week when Meta announced they put out this really big CapEx number, this projection, but they also had really strong results. And it was pretty clear AI was helping that business go up. And so you saw the stock go up. With Google, with Alphabet, you're seeing kind of the opposite. The business is still strong.

3:10It's like they showed a similar acceleration in their business and they put out a big CapEx number. But in the market reaction afterwards, everyone's kind of more keen on the CapEx number. The other difference between the two is Metastock was way down before their earnings report because there was some other concerns about them and Google's has been up a lot. And then you've had this week kind of this general overall worry about AI disruption, what AI could do to all these traditional tech companies. And that feeds into it as well. That was WSJ Heard on the Street columnist Dan Gallagher. Thanks so much, Dan.

3:41Thank you for having me. Reporting after the bell, Amazon said its sales rose in the most recent quarter. And the company said it expected capital expenditures of$200 billion in 2026 because, like its rivals, it's also picking up its spending on AI. For more on Amazon's earnings, visit WSJ.com. The government shutdown delayed the release of the Labor Department's official January jobs report, so it'll be out next week rather than tomorrow. But a bunch of other reports are signaling that the labor market got off to a rough start this year. Some of those are other government reports, like the Labor Department won on job openings.

4:18Those fell in December to their lowest level since 2020. Other indicators are gloomy, too. An estimate out today from Reveglio Labs, a workforce data company, said the U.S. lost more than 13 ,000 jobs in January. And Challenger Gray and Christmas, which tracks layoffs, said companies announced more than 108 ,000 job cuts last month, the highest level for January in more than a decade. Those concerns about the health of the U.S. labor market, as well as worries about the tech sector, again weighed on stocks today. The three major indexes each fell more than 1%, with the Nasdaq posting the biggest loss and closing down 1.6%, extending its worst route since April's tariff crash.

4:58And today, Bitcoin fell below$64 ,000, trading at its lowest levels since October 2024. That might come as a surprise to some who thought there would be a golden age for crypto under a friendly Trump administration. Bitcoin hit a record high above$126 ,000 in October. But in the months since, traders seem to have lost their appetite for crypto. For more on what's driving the decline, I'm joined now by journal reporter Vicky Gauhuang. Vicky, in recent months, stocks have hit records and so have safe haven assets like gold and silver. But Bitcoin has been on the decline. What's going on there? Yeah, so Bitcoin has actually been a bear market since late last year.

5:39The crypto market has been experiencing thin liquidity where there just hasn't been as much demand, whether from individual investors or institutional investors for digital assets. And then coming into the new year, investors have been rotating out of tech stocks and in tandem with that, investors are rotating out of Bitcoin. So it has been under further pressure in recent days because of that rotation and macroeconomic and geopolitical uncertainties. So on a sort of strategic level, how do investors think about Bitcoin? Like, do they think of it like gold and silver, like a safe haven investment, or do they treat it more like a tech stock?

6:21Historically, Bitcoin has acted like a sort of highly leveraged tech stock. It's been trading like a speculative asset where it's super volatile. The industry has pitched it as a safe haven, a store of value, a hedge against inflation. That's the narrative that it's supposed to be this digital gold, that it would perform better than gold. But the reality is that it just has not acted like a hedge against inflation and it has underperformed gold. Crypto has been on the downswing here. What would it take to turn things around? So a lot of crypto investors are saying that this is kind of the strangest crypto bear market in the entire history of the industry because in the past crypto winters, what happened was that there would be a big scandal, a big hack into an exchange or the collapse of a prominent industry company that would usher in this collapse in prices.

7:25However, this time, it seems like a lot of Wall Street institutions are still adopting crypto or integrating crypto into their systems, such as Fidelity, introducing their own stablecoin, or Wall Street firms are continuing to launch new crypto or digital assets funds for investors to invest in them. So it seems like some investors believe that as long as this Wall Street adoption continues, eventually the market might bounce back slowly. But it would probably take a year or two years for that to happen. That was Wall Street Journal reporter Vicky Gahuang. Thanks, Vicky. Thank you, Alex. And a merger between Rio Tinto and Glencore is off after the mining company's abandoned talks.

8:10The deal would have formed the world's largest mining company with a market value of more than$200 billion. Coming up, how the latest round of Jeffrey Epstein emails took down the leader of one of the most prominent law firms in the U.S. That's after the break.

8:40read comes in. Real experts and real talk. Subscribe to the pre-read presented by Workiva.

8:51Last week, the Justice Department began releasing what it says is the final batch of files related to its investigation of Jeffrey Epstein. And some of the people who appear to have ties to the disgraced financier are feeling the effects. One of those people is Brad Karp, who for the past 18 years has been the leader of Paul Weiss, one of the country's biggest law firms. Yesterday, Karp resigned as the firm's chair after new revelations about his association with Epstein. For more on Karp and the impact of his resignation, I'm joined now by WSJ National Legal Affairs reporter Erin Mulvaney. Erin, Brad Karp is a huge figure in the legal world.

9:27What is he known for? So his reputation is one of a very charismatic, dynamic leader. He's really transformed during his time as leader, Paul Weiss, from largely known as a litigation shop with very important high profile litigation to one of the major players in the mergers and acquisitions space. And it's just one of the most elite law firms in the world. And he's been at the helm of it for 18 years. And the client work he does has risen his profile, made him a very important member of the industry for years. So what happened inside the firm after the revelations in the Epstein emails came out?

10:08The recent batch of Epstein emails showed that he had corresponded with him months before his death, talking about some plea agreements. And previously, he had attended dinners with him and asked for his son to have a job on a Woody Allen set. There were just things that stood out that I think drew a lot of media attention that the partners felt like they couldn't really ignore. And there was a meeting among a small group that came to the consensus that it was best that CARP step down as chair. And so yesterday they said, Brad, you're going to need to step down. And the understanding was I think it was a hard decision.

10:45He apparently, according to our reporting, was taken aback, but wanted to do what was best for the firm. Paul Weiss says CARP plans to stay on as a partner, but what does his resignation as chair mean for the firm and its dealings with Wall Street? It's worth saying who is replacing him. Scott Barche, he basically had all the corporate dealings at Paul Weiss. So my understanding is he has a very different personality than Brad Harp, but he also is responsible for a lot of the change as well. They had one of their best years ever last year. They remain a very elite firm. Harp is still remaining on and maintaining his clients as far as we know.

11:24It remains to be seen what the shift will mean. That was WSJ reporter Erin Mulvaney. Thanks, Erin. Thank you so much. In response to the Epstein emails, Paul Weiss had said that Karp never witnessed or participated in any misconduct. And in a statement yesterday, Karp said that, quote, recent reporting has created a distraction and placed a focus on him that wasn't in the firm's best interests. And across the Atlantic, revelations from the Epstein files are threatening Prime Minister Keir Starmer's hold on power. UK lawmakers are questioning why he appointed Peter Mandelson to be Britain's ambassador to Washington.

12:00Starmer fired Mandelson last year after emails between Mandelson and Epstein indicated that the two were good friends. Now, newly released files appear to show that Mandelson, while a government official, said Epstein information that could have allowed him to trade on inside information. British police have said they're investigating whether the emails broke the law. Mandelson hasn't publicly commented on the emails but has apologized to Epstein's victims. And President Trump said today that he wants the U.S. to negotiate a new strategic arms treaty with Russia. As we reported on this morning's show, the previous one has expired.

12:34Many lawmakers have argued that new arms control agreements must include China, which is building up its own nuclear forces. So far, though, China has refused to participate in strategic arms talks. Trump didn't mention China today. And that's what's news for this Thursday afternoon. Today's show is produced by Pierre Bien-Aimé and Alexis Moore with supervising producer Tali Arbel. I'm Alex Oseleff for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

13:14Some of the best lessons don't come from a classroom. They come from experience. on The Power of Advice, a new podcast series from Capital Group. You'll hear from CEOs, investors, and founders about how they built careers, took risks, and reinvented themselves. If you're starting your own journey, this is the kind of advice you won't want to miss. Available wherever you get your podcasts. Published by Capital Client Group, Inc.