Dispatch #204: Correction Par Excellence

In this patch of your weekly Dispatch:

• Brazil Brings the Solana ETF 💧

• Morgan Stanley Calling ☎️

• Short-term Holders Lose Some 😡

The Big Idea

Market Mayhem and the Resilient Crypto Rebound

The week kicked off with a dramatic market-wide selloff, sparked in part by the Bank of Japan’s (BOJ) unexpected rate hike – the first in nearly three decades. As the BOJ raised rates traders who had previously borrowed Japanese Yen (JPY) at rock-bottom rates to invest in assets that offer higher returns found themselves in a tight spot. The stronger yen increased their borrowing costs and forex losses, forcing them to flee the once-popular carry trades. This unwinding triggered a global financial domino effect, sending shockwaves through markets worldwide.

From the Japanese stock market’s steep plunge (the Nikkei’s biggest two-day drop in history) to the Turkish and Korean markets' turmoil and the Australian market's bleak outlook, the fallout was severe and global. In the US, stock market futures hinted at a COVID-style crash and crypto markets also felt the heat. Over $1B in crypto futures were liquidated within 24 hours, with Ether dropping to $2,060 and Bitcoin slipping to $49,112. This article details how the crypto arm of Jump Trading specifically was involved in liquidating millions, further exacerbating the situation.  

The panic was palpable:

• The Crypto Fear & Greed Index showed extreme fear.

• The Cboe Volatility Index (VIX), often referred to as Wall Street’s “fear gauge,” climbed to as high as 65, its highest since the early days of the Covid-19 pandemic. 

Despite this chaos, Bitcoin showed resilience. By early Friday morning, it had rebounded to more than $60,000. 

While the initial selloff was jarring, the rapid recovery underscores the underlying strength in the crypto market. Such corrections, particularly during a bull market, are part of the natural market cycle.

The takeaway is “it wasn’t that big of a dip” and it’s par for the course – crypto showed resilience in light of global financial adjustments. 

The Latest In…

Morgan Stanley’s Sales Team

We are used to this linguistic combo – Bitcoin and not financial advice. This is why Morgan Stanley telling its financial advisors to pitch Bitcoin ETFs to clients is huge. CNBC reported (and no one contradicted) the news that the firm’s 15,000 wealth advisors can now solicit eligible clients to purchase shares of two Bitcoin ETFs. This is a first for a major Wall Street investment bank. In doing so Morgan Stanley is responding to client demand and the evolving digital asset landscape, according to people in the know. The bank remains cautious, limiting Bitcoin ETF access to clients with a net worth of at least $1.5M and a higher risk tolerance, the people said.

The Latest In…

🇧🇷 <3 Solana

Brazil is making crypto history. The local Securities and Exchange Commission (CVM) has approved the country’s first Solana-based ETF, marking a significant step in global crypto ETFs. Though it’s still pending final approval from the Brazilian stock exchange B3, the ETF will track the CME CF Solana Dollar Reference Rate. The move underscores Brazil’s growing role in crypto investments and follows the listing of a Solana ETF in Switzerland back in 2021. A special shout-out to the Nexo community in Brazil. 

The Latest In…

The Final Boss

Ripple Labs saw a dramatic 26% surge in XRP's price following a ruling in its ongoing SEC case. On Wednesday, a New York federal judge ordered Ripple to pay a $125M civil penalty and imposed a permanent injunction against violating U.S. securities laws, signaling the near end of the three-year lawsuit filed by the SEC in December 2020. As a result:

• XRP jumped to $0.63, recovering much of its recent losses. 
• Ripple Labs CEO Brad Garlinghouse and co-founder Chris Larsen hailed the decision as a victory for both the company and the crypto industry.
• The ruling triggered a wave of short position liquidations highlighting the market's surprise. 
• The SEC is expected to appeal.

The Week’s Most Interesting Data Story

The Long-term Holder Gets the Worm

The recent sell-off caused a notable spike in realized losses, totaling around $1.38B, marking it as the 13th largest loss event on a USD basis. Notably, 97% of these losses were incurred by short-term holders, while long-term holders remained relatively unaffected. This emphasizes that short-term holders bore the brunt of the recent market turbulence, underscoring their heightened vulnerability to such sell-offs. Diamond hands, anyone?

Hot Topics

What the Community is Discussing:

A picture to remember.

Fear is the mind killer.

ETH staking reached an all-time high of 27.95%.

What to Watch for Next Week:

• What’s next for Japan?

• Istanbul Blockchain Week

• Will markets recover completely?

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