Crypto’s Long, Hard Fall This Winter

Summary

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WSJ What’s News – PM Edition

Episode: Crypto’s Long, Hard Fall This Winter

Date: February 5, 2026
Host: Alex Osola
Notable Guests: Dan Gallagher (Heard on the Street columnist), Vicky Go Huang (WSJ Reporter), Erin Mulvaney (National Legal Affairs Reporter)

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Episode Overview

This episode unpacks several major stories in business and global news, focusing heavily on the recent, sustained decline in cryptocurrency (especially Bitcoin), record capital expenditures from major tech companies to build AI infrastructure, troubling signals in the U.S. job market, and fresh fallout from the release of Jeffrey Epstein-related files shaking both UK politics and the U.S. legal world.

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Key Discussion Points & Insights

1. Big Tech's AI Spending Boom

[00:40–03:26]

• Meta and Google:

  • Meta is set to spend up to $135 billion on capital expenditures in 2026, while Google’s parent Alphabet expects up to $185 billion—doubling last year's figure.
  • Purpose: The majority is directed at developing AI infrastructure, specifically advanced chips and servers.
  • Motivation: Companies are in a "race to build up AI services [and] get as much market share," especially around models like Google's Gemini (competing with ChatGPT and Claude).

• Investor Sentiment:

  • Mixed reactions: Meta’s share price jumped after their strong results alongside big CapEx, while Alphabet’s share price faltered amid market worries over AI’s disruptive potential.

• Notable Quote:

  • Dan Gallagher [01:58]: “They’re in a race to build up AI services, get as much market share, getting users really accustomed to their AI platforms.”

• Amazon:

  • Announced $200 billion in planned CapEx for 2026, also focusing on AI.

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2. Labor Market Signals Weakness

[03:31–05:22]

• Jobs Data Delayed:
  • January’s official jobs report was postponed due to the government shutdown.
• Other Reports Point to Downturn:
  • Job openings at their lowest since 2020.
  • Revelio Labs: Over 13,000 U.S. jobs lost in January.
  • Challenger Gray & Christmas: More than 108,000 job cuts in January, the highest for that month in a decade.
  • Major U.S. stock indices all declined, with the Nasdaq down 1.6%—its worst stretch since the “April tariff crash.”

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3. Bitcoin and Crypto: The Long, Hard Fall

[05:22–07:52]

• Bitcoin’s Drop:

  • Fell below $64,000, its lowest since October 2024. This is notable considering its record high of over $126,000 just months prior.

• Market Dynamics:

  • Crypto is in a “bear market” since late last year with ongoing “liquidity strain”—meaning both individual and institutional demand has dried up.
  • Investors are rotating out of both tech stocks and Bitcoin amid macroeconomic and geopolitical uncertainties.

• Bitcoin’s Image Problem:

  • Historically pitched as “digital gold” and an inflation hedge, it has shown itself to be “a sort of highly leveraged tech stock” instead, failing to outperform gold.

• What Could Turn It Around?

  • Unlike previous “crypto winters,” this downturn isn’t triggered by high-profile scandals.
  • Wall Street adoption continues, e.g., Fidelity introducing its own stablecoin and institutions launching digital asset funds.
  • Recovery may take “a year or two” if adoption persists.

• Notable Quotes:

  • Vicky Go Huang [06:10]: “Historically, bitcoin has acted like a sort of highly leveraged tech stock...It just has not acted like a hedge against inflation and has underperformed gold.”
  • Vicky Go Huang [06:51]: “A lot of crypto investors are saying that this is kind of the strangest crypto bear market in the entire history of the industry.”

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4. Legal and Political Fallout from Epstein Files

[07:53–11:41]

• US Law Firm Impact:

  • Brad Karp, longtime chair of Paul Weiss (one of the country's most prestigious law firms), resigned after new Epstein files showed correspondence and dinners with Epstein, though the firm insists Karp never witnessed or participated in misconduct.
  • Succession: Scott Barshay, noted for driving corporate growth at the firm, takes over as chair.

• UK Political Scandal:

  • New Epstein files implicate Peter Mandelson, recently dismissed as ambassador to Washington, for sharing potentially sensitive info with Epstein.
  • Police are investigating for possible lawbreaking.
  • Ongoing pressure now faces PM Keir Starmer’s government.

• Notable Quotes:

  • Erin Mulvaney [10:22]: “[Partners felt] they couldn’t really ignore” the attention from the emails, leading to a consensus for Karp to step down.
  • Karp Statement [11:45]: “‘Recent reporting has created a distraction and placed a focus on him that wasn’t in the firm’s best interests.’”

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Notable Quotes & Timestamps

• AI Arms Race:
  • Dan Gallagher [01:58]: “They’re in a race to build up AI services, get as much market share, getting users really accustomed to their AI platforms.”
• Bitcoin’s Reality vs. Narrative:
  • Vicky Go Huang [06:10]: “The narrative that it’s supposed to be this digital gold... But the reality is that it just has not acted like a hedge against inflation and has underperformed gold.”
• Crypto’s Unusual Bear Market:
  • Vicky Go Huang [06:51]: “...this is kind of the strangest crypto bear market in the entire history of the industry.”
• Paul Weiss Leadership Fallout:
  • Erin Mulvaney [10:22]: Partners decided “it was best that Carper step down as chair...it was a hard decision.”
• Karp’s Statement (Read by Host):
  • [11:45]: “‘Recent reporting has created a distraction and placed a focus on him that wasn’t in the firm's best interests.’”

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Useful Timestamps

• Google & Meta AI spending: [00:40–03:26]
• Amazon CapEx & Job Market Segment: [03:31–05:22]
• Bitcoin’s decline, crypto bear market: [05:23–07:52]
• Paul Weiss, Epstein Email Fallout: [09:42–11:44]
• UK Political Fallout: [11:45–end]

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Tone and Takeaways

• The episode’s tone is brisk, data-driven, with a strong emphasis on hard financial facts. The speakers adopt a matter-of-fact yet analytical approach, especially on the unpredictability of tech investments, the underperformance of crypto, and the seriousness of reputational risk in the legal and political world.
• Anyone tuning in to catch up on what’s moving markets and shaking up institutions gets not only the headlines but nuanced explanations and real-world implications.

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Transcript

[A]

Hey, this is Jessica Mendoza, host of the Journal Podcast, our show about money, business and power. If you're looking for more deeply reported stories like we share every day, consider becoming a subscriber to the Wall Street Journal. Visit subscribe.WSJ.com TheJournal all lowercase to subscribe now.

[B]

Bitcoin hits its lowest price in more than a year. What's driving its fall?

[A]

That's the narrative that it's supposed to be this digital gold, that it perform better than gold. But the reality is that it just has not acted like a hedge against inflation and has underperformed gold plus.

[B]

Big tech companies like Google and Metta 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 Osola 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. Big 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?

[C]

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 and a lot of it goes to specifically the chips and the servers to power that.

[B]

Why do these companies feel the need to do this? What is the competitive pressure here?

[C]

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 they 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.

[B]

So how are investors responding to the announcements of all of this spending? I 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?

[C]

Honestly it's mixed because it depends on the day you ask that question we saw last week when Metaverse 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. It'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 Meta stock 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.

[B]

That was WSJ heard on the street columnist Dan Gallagher. Thanks so much, Dan.

[C]

Thank you for having me.

[B]

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. Those fell in December to their lowest level since 2020. Other indicators are gloomy, too. An estimate out today from Revelio Labs, a workforce data company, said the US 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 a January in more than a decade. Those concerns about the health of the US 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. And 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 Go Huang. Vicki, 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?

[A]

Yeah, so bitcoin has actually been a bear market. Since late last year, the crypto market has been experiencing same 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.

[B]

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?

[A]

Historically, 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 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 has underperformed gold.

[B]

Crypto has been on the downswing here. What would it take to turn things around?

[A]

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. However, 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 who invest in them. So it seem 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.

[B]

That was Wall Street Journal reporter Vicky Go Hwang. Thanks, Vicki.

[A]

Thank you, Alex.

[B]

And a merger between Rio Tinto and Glencore is off. After the mining company's abandoned talks. The 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 US that's after the break. Hi, I'm Christopher Mims. And I'm Tim Higgins. We're the hosts of the Wall Street Journal's Bold Names podcast. On our show, we bring the bold name companies featured in the pages of the Wall Street Journal to life through real conversations with the people that lead them. If you're looking for more news and insights that bring you inside the C Suite, consider becoming a subscriber to the Wall street journal. Visit subscribe.WSJ.com Bold names to subscribe now. Last 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 Aaron Mulvaney. Aaron, Brad Karp is a huge figure in the legal world. What is he known for?

[D]

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 acquisition 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.

[B]

So what happened inside the firm after the revelations in the Epstein emails came out?

[D]

The recent batch of Epstein emails showed that he had corresponded with them 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 Carpenter 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. He apparently, according to our reporting, was taken aback but wanted to do what was best for the firm.

[B]

Paul Weiss says Karp plans to stay on as a partner. But what does his resignation as chair mean for the firm and its dealings with Wall Street?

[D]

It's worth saying. Who is replacing him? Scott Barchay. 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. Karp still remaining on and maintaining his clients. As far as we know, it remains to be seen what the shift will mean.

[B]

That was WSJ reporter Erin Mulvaney. Thanks, Erin.

[D]

Thank you so much.

[B]

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. Starmer 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, sent 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 US to negotiate a new strategic arms treaty with Russia. As we reported on this morning's show, the previous one has expired. Many 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 Biennime and Alexis Moore, with supervising producer Tali Arbel. I'm Alex Osoleff for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.