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Markets Outlook
Why This Digital Asset Fund Fled to Cash Amid $19B Crypto Meltdown | Markets Outlook
00:12:39
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- [00:00]
A
If you have lost money or you're trying to make it back, it's a bad idea in a market like this. It's very choppy, there's low volume, it's better to just check out. The market will exist under better circumstances in the future and come back. Then.
- [00:20]
B
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- [01:26]
A
Hey, Jen. Thanks for having me.
- [01:27]
B
Of course. Thanks for coming back. I wish that you were coming back when the markets were all in the green and we were having a great time, but that is not the case. I think since last weekend things have been a little bit shaky and we obviously saw Bitcoin and Altcoins plunge this morning with Bitcoin dropping below its 200 day average. Talk to me a little bit about what you're watching this morning.
- [01:49]
A
Yeah, so last week we had, I think the largest liquidation cascade ever in, in crypto's history, which is a pretty big deal. It was a mechanical failure. It wasn't a fraudulent thing like ftx. It's just a mechanical failure and you had a lot of leverage built up in the system. And because of mispriced Oracles, it created this liquidation cascade at Binance. And because Binance is like a central venue for hedging, also a lot of market makers pull liquidity not just from Binance, but from all the other places they were providing liquidity, so created thin order books and created this massive liquidation. Cascade across the board. I think 19 billion is what's reported that was liquidated at that point, which is, it's a pretty big number. It's 10 times the size of FTX and we still haven't sort of come to board. It is so big that I'm expecting that there's some dead bodies going to be floating up soon and some major stories are going to come out. So looking at that and as soon as you had that, you sort of had a little bit of a bounce, which is again a very mechanical bounce in the market and now you're having a sell off sort of happens. So the volumes are going to dry up. It doesn't look overly bullish. It is leaning bearish, especially with the gold rally happening right now. So yeah, I think it's the time to just like what we've done on our side is we are over the last 24 hours we went all into cash. We've been trading this since 2022, the end of 2022. So this is kind of like a cutoff cycle moment for us and we would rather be sitting in cash and, and sort of finding opportune times to enter the market again, which would really be much lower when the dust settles. Or if we see bitcoin come back and break out, hold over 117k on the weekly and we see some real volume and momentum behind bitcoin, then we would catch the train back up. But till that happens, we have no interest in being in the market.
- [03:39]
B
Satraj that's quite interesting because many of the guests I've had on even in the past week have said still bullish for Q4. They still think markets can turn around. But you've pointed out a few good points here, that mechanical failure and the mass liquidations we saw last week. Talk to me a little bit about what you, what you mean when you say mechanical failure and how that contributes to a more bearish look for you for the rest of Q4.
- [04:05]
A
So when you have a lot of people liquidated like we had there, a lot of positions liquidated, it means there's just not enough capital, enough sort of trust to sort of come back and bid up positions or buy stuff and you have a lot of people that have lost a lot of money. So volumes naturally would dry up after an event like that. So it's very difficult to come back full steam ahead and keep bidding up. And you're seeing that today in the market, like sell off is relentless and it's those moments where you have to let the Dust settle before you play or enter the market.
- [04:38]
B
Why do you think some people are still bullish for a Q4? I mean, some of the guests I've had on, analysts, Chief Investment Officers, CEOs still bullish for Q4. Is that just hopium?
- [04:49]
A
I think to an extent there is and to an extent there's not. So I think, look, you have sort of like a regional banking crisis coming back again. The last time that happened, bitcoin did rip and it sort of ripped off that because it sort of signals that there are now going to be like this Quantitative easing. There's all of that sort of coming and bitcoin sort of made for this moment. But I think you have, on the other side, you have things like the DATs going to start trading under NAV, you have stock market at all time highs. If that can't be sustained, that puts pressure on the sort of, on all these DATs, some, maybe four sellers in the market. So when you have sort of that dynamic playing out, it's almost like you, you're not fully bullish, you're not fully bearish because you know that you, you have these two elements in place. So for us, the better, the better view is to just sit out and wait and be opportunistic because you've sort of earned that right over two years of making good decisions.
- [05:44]
B
All right, you say be opportunistic, at what point? What are you looking out for if you were going to take that cash and put it back into the crypto markets?
- [05:52]
A
So for us, I think we want to see bitcoin sort of like bottom out and base out. And I think that takes some time. It's not going to be immediate. So what an immediate thing would have been. Last week you had the big crash and we're already trading at 120k and it's like everyone walked in. But now that we're selling off slowly and it's happening over a few days, it means that the market hasn't found its equilibrium yet and we need to wait sort of for that to happen. And there's just a lot of stuff happening that creates a lot of uncertainty. You're, you have the tariff stuff, you have that. So markets tend to not like uncertainty, especially when it's full on. Like crypto in general is sort of like a risk on trade. So I think the moment's going to come for that. All the macros sort of lining up for that, especially with the lower interest rates and the quantitative easing. But I don't think we're there yet. If you sort of remember, in 2022 they announced the interest rates were going to come up I think in December and markets were still ripping into January and February. So I think it takes time for the market to digest all this information and we have plenty of time to sort of wait to see that how that sort of plays out.
- [06:57]
B
Where do you think we're going to end Q4.
- [07:02]
A
At this point? Honestly, I don't know and that's just the best answer I can give. There's just a lot of information and a lot of stuff that has to come out. And our job, you know, is, is to be less predictive and more reactive to the information the market provides. And I think this is a really good example for me to say I just don't know what's going to happen.
- [07:23]
B
It's a good answer. No one knows what's going to happen. Although sometimes some people try to predict based on their various different analyses. But I got to talk to you a little bit about market manipulation, insider trading. We saw, I think it was last weekend one whale wallet made $192 million shorting Bitcoin. I think 30 minutes before some tariff news came out of the United in regards to China. How have you been watching that?
- [07:49]
A
Those are one of those things where it's very hard to prove there are on decentralized exchanges. It's hard to track who it is who put the position. Obviously the timing is very suspect and it does beg the question. And I think in the long run I think it creates the case for regulation to step in. We're entering this world where both TRADFI and crypto are merging so deeply together and I don't see a set of rules where like the rule set in Tradfi is very strict and strong and there's basically no rule set for crypto around this. So I think stuff like this gets regulators question stuff and I think it will be the case for stronger regulations going forward.
- [08:29]
B
You know, you said earlier that there are just like a lot of things up in the air as one of the reasons why, you know, you're sitting on cash right now in the position that you're in. One of those things that's up in the air is regulation. Right. We're waiting for market structure. The government is now closed in the United States where the middle of October and many folks have said if this regulation doesn't pass by the end of the year, it might not as other issues take precedent. What do you think happens if that market structure regulation doesn't happen in the United States by the end of 2025.
- [09:02]
A
I think there's still time in the administration. It may come next year, but I think it's going to come eventually. I see the trad fi sort of overhead with crypto. I just don't see it being separate. You can see even in the way they're approaching sort of building more closed sourced blockchains to do things. So I think it's, it's, it's a signal of what's to come.
- [09:24]
B
And now I want to zero in on the defi aspect of regulation. A lot of what we're talking about happens in the, in the defi ecosystem. I believe there is a part carved out for defi in that market structure. But what do you think we're going to see happen? Like, I'm just so curious from your perspective how you think defi regulation is going to play out and if defi can actually be regulated.
- [09:48]
A
How I would think about it is if you're defi, you're going to have to prove your defi. Otherwise you're going to have to be regulated like you're not defi. And I think proving defi is going to be, I think where a lot of the conversation is about like how decentralized are you and how can you prove you're decentralized. So what's the metric for proving decentralization? And I think there's a lot of products in the space that are not decentralized. They are partly, they're partly not, they're not provable. And I think when you put all of that into place, it's like in a good regulatory environment you won't have an opaque rule set. You'll be like, this is the proof that you're decentralized and this is the proof that you're not. And if you're not, you're going to be regulated the way everyone else is regulated.
- [10:32]
B
And satraj, for any traders watching this show, what advice would you give to them right now?
- [10:37]
A
This is a great time to take a break. We've been on for a very long time this entire year thinking about the market, watching it play. This is a well earned break to sit on the sidelines. There's absolutely no rush to take a position in the market when it's this uncertain. I think if you have lost money or you're trying to make it back, it's a bad idea in a market like this. It's very choppy, there's low volume. It's better to just check out the market will exist under better circumstances in the future and come back then.
- [11:07]
B
Satraj, thanks so much for joining me. I hope you have a great weekend. It's always a pleasure having you on the show.
- [11:11]
A
Awesome. Thank you so much. Take care.
- [11:43]
B
This episode is sponsored by Bridge, a stripe company. Just as the Internet made information global, stablecoins are making money global and Bridge is the infrastructure powering that shift. Built for speed, scale and simplicity, Bridge helps businesses send, store, accept and launch stablecoins instantly serve global customers without navigating the complexities of setting up crypto Rails. It's how companies like X, Shopify and Airtm unlock new markets, reduce FX costs and move money at Internet speed. Explore the future of global financial infrastructure at Bridge xyz Looking for a faster, cheaper way to move money worldwide. Owling, now listed on the NASDAQ under the ticker symbol OWLS, is building the rails for stablecoin payments. With OwlPay, you can seamlessly convert fiat currency to stablecoins, send money as easily as a text message and on or off ramp globally. Learn more about owlting@owleting.com.