Aug 18, 2023

Bitcoin has slumped over 7% in the past 24 hours to below $26,500, marking one of the biggest drops in recent months.

Video transcript

Bitcoin drops 7% over the past 24 hours, marking one of the biggest drops in recent months. Joining us now to discuss the carnage is crypto markets in the crypto market is hash note, Ceo Leo Maura Muara. Welcome Leo. Welcome back. Good to see you again to see my man. Yeah, it's been a while since I saw you. I think we were having lunch. Yeah, I think I saw you at one of these uh tie events at one point. Yeah, exactly. So uh we saw the price drop um here uh in the past few hours, it was a massive sell off. Uh you know, the rumor was going around on spacex and while everyone likes to think that that's uh you know, it sounds nice and of course it involves Elon Musk and everyone loves a story that involves Elon Musk. How much of it is that and versus how much of it is what I think it is, which is China. Yeah, it's super unclear, right? Um For one thing, I think the timing matches your story to some extent uh the big sell off happened at um at a rather odd time for us, uh something like 5 30 or six pm, our time on the east coast. However, um I think it would be a little bit unusual for kind of China as a whole to be selling um so acutely or any or any real like big institution out there selling in that way. However, um it almost certainly is a big institution. It could be SpaceX, it could be a hedge fund, taking advantage of the uh of the media noise to be able to sell out of a big position. Um The one thing that is certain is that there was a big seller, some whale selling into the market, probably in my opinion, um likely to have used an OTC market maker to do so. Um you see a big sell off, then you see it triggering all the uh all the stops and all the liquidations um across the board. I think I saw over a billion in uh in liquidations happening during that period. Um And you see some of the activity this morning, I think it looks a lot like market makers getting out of their position. Um you know, continuing to selling, continue to sell Bitcoin, but actually buying some of the other stuff that they likely sold um in conjunction with the Bitcoin that they were selling uh during that big, during that big sharp sell off. So it, it looks very reminiscent of OTC hedging to me, you know, the, the market has been relatively e liquid and flat. You know, we heard Lawrence at the beginning of the show say if you have been following what's going on, following the news following what's going on in China, it's not actually that surprising to see what happened this morning. Were you surprised to see this? This sell off? I mean, any acute sell off is always surprising, right? It's difficult to use macro variables to say that something, you know, something sharp happened because high interest rates, for example, a lot of people are attributing this to high interest rates, but high interest rates have been there forever. It's not like we suddenly got high interest rates at that moment. I think the positioning might be relevant there. In fact, I think I know a lot of Macro players who are short crypto because of the because high interest rates being uh being a a factor there in terms of um the lack of risk appetite. However, um I think there are other things that are going on there and certainly this, this has to have been catalyzed by one big seller or a consortium of big sellers, I suppose, right? But the the question is which one? And, and uh my, my guess, I don't know if I, you know, I think it probably this the likes of spacex given the somewhat sophistication of uh the people there, they know that if they put in a big order during a during a thin market that it would actually hurt their position. On the other hand, um, yeah, if somebody's in a panic, they're in a panic. Yeah. It may not have been, it might not have been a panic. You know, spacex is not a trading firm. Right. They're not, their business is not to sit there and work an order for hours and hours and get out of it as quietly as they can. They likely would have gone to an OTC market maker and said, hey, here's my position offloaded for me. And uh it's part of why I think it's um a lot of this action looks like, looks like a big market maker that took down a big order. Um This morning, you see them selling Bitcoin and buying their beta hedges. So, um I think also, um, indicative of that pattern is during that big sell off, everything sold off pretty much um on their betas. Like you didn't see anything kind of getting relative value dislodged at that time, it looked like one player doing a coordinated sale of everything that was correlated. Um in order to get out of their position, in which case, that would not necessarily be a space. SpaceX was just solely in, in Bitcoin, right? Uh Well, if, if a player like spacex goes to an OTC market maker and says I want to sell, I don't know, let's call it 50 million Bitcoin, um instead of just selling Bitcoin, the OTC market maker will actually sell everything that's correlated according to their historical correlation. So the fact that these correlations um were able to keep up during that sell off tells me that it's a fairly sophisticated player, probably a market maker selling everything at once and then working out of their um Bitcoin versus other token uh positions over time, which is kind of what you're seeing this morning. Um I think that's a, you know, that's something that a typical, um, counter party, like a space X or a hedge fund or, uh, even, you know, other big, uh, macro players aren't gonna bother doing, but a market maker, you know, as part of their entire business and lastly, crypto told Coindesk that they expect sentiment to remain bearish in the upcoming days. Do you agree? What are you expecting? Yeah, I think that's right. Um, it's often hard to buck the trend when you're, when you're at a level like this. And, you know, honestly, the whole market trade is kind of heavy here. Um, every time we had good, good market news it straight it up a little bit, but kind of immediately started to, started to fade back off after that and I don't see any good reason for there to be a lot of optimism going into the weekend here. Leo, I hope to see you some one Thursday back again. All right, come back. It was great to see you guys. Leo, thanks so much for joining the show. Have a great weekend. Have a great weekend that was hash not CEO Leo Muara.

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