Pratica di Shadowing: The connection between STRC's crash, Binance, and government Control - Impara a parlare inglese con YouTube

Yesterday was the worst day in digital credit history.

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Yesterday was the worst day in digital credit history.

Michael Saylor's SDRC traded down to almost $82 when it's intended to trade at par at $100.

Competitor Seda traded down to the low 90s before also bouncing.

Today we're going to discuss what happened, why it happened, and what it means for the market.

Let's go.

What is up, everybody?

Welcome to the Daily Wolf on Yahoo Finance.

I am your host, Scott Melker, also known as the Wolf of All Streets.

As you know, we take 15 minutes every single weekday to dive into the news that's moving crypto and macro markets,

and we try to discern what is signal from noise.

We have a lot of noise in the market right now, a lot of bad takes about what's going on.

So we're going to try to dig in and figure out what the actual signal is and what's actually happening.

Now, as I mentioned at the beginning, we had a pretty bad day yesterday for preferred around Bitcoin.

Now, to be honest, Bitcoin trading kind of sideways, slightly down.

We all know that it's trading around the 200 MA, which has historically been a great bottoming signal.

So Bitcoin itself remaining resilient, but it's hard not to notice all of the noise around the products that are built around Bitcoin.

Now, as I mentioned, we had the STRC and SATA crashes yesterday.

We have a great tweet here from the CEO of Strive, Matt Cole.

His product is SATA.

Now, you'll remember there's been a rotation into SATA.

It's been trading near par.

Matt is a longtime bond trader and portfolio manager, has never underperformed the market.

He really knows exactly what he is doing here.

As I've told you before, Sata and Strive is the only product that they have right now for buying Bitcoin.

They don't have the luggage that many people perceive strategy to have.

They don't have all of the other debt and the other products.

So people are viewing this potentially as a superior product.

This is what he said.

Today was the most difficult day in the history of digital credit.

STRC traded as low as $82.50.

SATA traded from par down to the low 90s before rebounding.

Both of them rebounded massively, which is a pretty interesting tell.

Now, here's what he had to say that I find even more interesting.

What happened today was a leverage liquidation event, not a deterioration in underlying credit quality.

There's an old saying in income markets that the road to hell is paved with carry.

When investors discover an asset that offers attractive yields, relatively low volatility, and strong underlying credit characteristics, many eventually decide that owning it is not enough.

They borrow against it.

They lever it.

They attempt to enhance the carry.

That works until it doesn't.

Now, anybody who's crypto native, who's ever watched price action on Bitcoin,

knows exactly what they're talking about here when you see a liquidation cascade of leverage.

Most famously in crypto, when Bitcoin broke below $6,000 in March of 2020 on the COVID scare,

we saw Bitcoin rocket down to almost $3,000.

The main exchange at the time for swaps was BitMEX.

They literally turned the exchange off and said it was for maintenance

because their order book was firing liquidations into no buy orders.

So the price of Bitcoin would have literally gone to zero on BitMEX that day if they didn't turn the exchange off.

It was liquidating into an empty book.

We've seen this, not to that dramatic level, in markets since the beginning of time, even with treasuries, which are viewed to be stable.

But that doesn't mean that the treasury all of a sudden is bad credit.

It's the trading and leverage that is around it.

So the question is, if this was a liquidation cascade, who was likely doing it?

We have another take on that here from Jesse Myers, who says, strategy is fine.

If everything stays as is, they can pay STRC dividends for 32 years.

So anyways, why the sell-off?

This appears to be a liquidation cascade.

Same idea.

Over the last six months, the narrative became that STRC volatility was reducing and price began to spend all its time in $99 to $100 range.

This invites leverage.

If you expect the price to always be north of $95, you can take on 20x leverage with your portfolio to buy more STRC and dramatically increase the yield on your portfolio.

This works great until it doesn't.

Seems familiar, right?

This is the killer, though.

STRC is designed as a free market asset.

When attention shifted to SEDA and STRC price flag, it may have raised the attention of opportunistic short selling hedge funds.

By shorting aggressively, they can push the price down

and start triggering margin calls and liquidations from folks who aggressively levered up their STRC positions.

Same idea from a different voice.

And we know that Wall Street's favorite short on the planet for a very long time was MSTR or strategy,

literally the most shorted stock on Wall Street for a very long time, and taking the same playbook to SCRC.

Now, the favorable view of that on the other side is that if they short it down and cause a cascade, they're also usually the buyer at the lows.

And if they can short it down to $82.50, buy at $82.50, it goes back to par.

They've captured $17.50 on that move and the yield that's on top of it.

Now, a lot of people proposing different solutions.

I've talked about this one before.

I am going to highlight it here from Jeff Dorman from ARCA.

Now, I will say that I was an investor in ARCA

and they went all in on Luna during the crash as it was crashing.

So I'm not sure that this is the best person to speak on risk management.

But he basically believes that they need to sell an enormous amount of Bitcoin

and MSTR to help bring STRC back up near par.

And at least buy some time.

Continue to watch every part of your cap structure melt because of the uncertainty you've created.

So basically saying they should sell off a few billion dollars worth of Bitcoin, shore up their cash reserves, send STRC back up to par.

and start again.

I don't think that's what's going to happen.

I don't think it's going to be needed.

I do think that STRC will slowly float back up to par.

But as you can see, this has become the hot topic right now.

Now, some of the bad narratives, obviously, people are saying this is just like Terra Luna from 2022 run.

I mean, Terra Luna was backed by vibes and prayer and a random bag of Skittles, right?

I mean, STRC here is backed by 846,000 Bitcoin.

This is not the same disease.

Now, we may have a fever, but it's not the same disease.

And comparisons like that are complete and utter and absolute nonsense.

So moving on from that, we're going to see what happens with STRC and what happens, of course, with SATA.

So the next story here, we have U.S.

agencies seek stable coin customer ID rules akin to banks in new Genius Act pitch.

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Now, this is pretty wild.

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This is the Fed, Treasury, OCC, FDIC, and FinCEN jointly proposing a rule requiring U.S stable coin issuers to identify customers like banks,

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full Bankrate Secrecy Act treatment here.

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So that means they will know exactly who uses a stable coin with full KYC and AML, what they did with it, full transparency into your wallet.

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Now, crazy here.

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We spent a decade terrified that the government would build a coin to spy on us with a central bank digital currency.

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Instead, what we did effectively was build it ourselves, handed a copy to Visa and Tether and called it freedom.

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We didn't dodge the surveillance state here.

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We basically franchised it.

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Right now, this is interesting because we cheered the Genius Act as an industry.

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Even I was a part of that until I talked to former CFTC chairman, my friend Chris Giancarlo, just a few months ago.

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I'm going to play a video for you of exactly what he said about the Genius Act.

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However, I will say, and I supported the Genius Act.

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I'm disappointed in it, however, in that it doesn't address the issue of privacy.

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The fact of where privacy doesn't appear in the Genius Act.

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Unfortunately, with the Genius Act, we got the worst.

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We got both surveillance by stablecoin operators, which is not prevented, and surveillance by government through the Bank Secrecy Act.

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Now, arguably, if the government had said, no, we're going to actually have the government do a central bank digital currency,

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well, our Fourth Amendment would have protected it from government surveillance.

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And since it was done not by a commercial actor, you wouldn't have had commercial surveillance.

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Unfortunately, we've got both commercial surveillance and government surveillance built into.

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You're basically saying that we ended up through a Trojan horse

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or backdoor with completely public stable coins where they'll still be able to view all of our transactions.

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We did not replicate cash in a digital manner.

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And we don't maybe the thing that we let in is the dystopian CBDC we were concerned about in the past.

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So yeah, we've feared a central bank digital currency.

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We've cheered governments that have banned them.

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We've railed against China and the ECB who have tried to create them.

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China actually has one because we know they're a violation of privacy and not cash.

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What we actually did with the Genius Act was give private companies complete transparency into everything that we do.

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And they can then give that information and have to to the government who has complete transparency into exactly what we do.

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Bitcoin, decentralized networks are more like cash, which people like to use.

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There's nothing wrong with wanting to have private transactions.

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Right now, stable coins are more dystopian and more like a central bank digital currency.

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And that's only getting worse if these agencies get what they're asking for here.

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Now, I told you a story that's a continuation of this and we didn't realize it at the time.

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But yesterday I told you a story about how Binance was

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effectively at risk of being kicked out of the European Union entirely because they tried to go through Greece, which was supposed to be the fast path, and they may get rejected there,

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meaning that they can only go to France.

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We have more information on why that may have happened, and that is this.

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European Central Bank's Lagarde, she's the head of that central bank, said to have pushed Greece to block Binance's Mika bid.

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Now, why does this matter?

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because to the point of the last story, there is no more vocal proponent for central bank digital currencies than Christine Lagarde.

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She believes that the European Union should have a central bank digital currency, that you should have your wallet be completely visible for every transaction you do to them.

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Not only that, she sees stable coins as a threat because stable coins in the United States mean more hyper-dollarization,

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means that more people use dollars and not the euro.

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So she has aggressively been rallying against the crypto industry and specifically against dollar

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stablecoins because she wants the even more dystopian version.

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So really interesting when you see us looking in our country to get more visibility into your wallets

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and Christine Lagarde doing the same over there and her specifically stepping in, which she has no business doing to block Binance from getting

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approval in the European Union is just another step in that same war against the crypto industry in Europe.

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So obviously some of these exchanges will get their licenses, OKEx, Kraken, Coinbase, and others.

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They're going to be compliant, but Binance is the largest.

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And by blocking them, especially knowing the way that people use Binance, she's trying to stop stable coins.

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Now, what I just said there is important because I've interviewed CZ multiple times, the former CEO and founder of Binance.

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And when I asked him where their hundreds of millions of customers come from, he says, most of them are using this like a wallet to send each other small amounts of stable coins, right?

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That is the activity that people are primarily using these exchanges for.

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Yes, many people are trading, many people are buying and holding and selling different tokens, but primarily people are using this as their digital wallet in

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countries where they don't necessarily have access to dollars to send dollars back and forth to one another.

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Huge signal here when you see the head of the European Central Bank who hates stable coins

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and who hates the industry stepping in personally to block the biggest exchange from having access to her entire continent.

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Now, you know we love nothing more on this show than our segment called How Not to Invest.

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Hit it.

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How not to invest.

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How not to invest.

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God.

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So this morning on my YouTube show at 9am, I just kind of wing it on Fridays.

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And for like 10 minutes, we played that video and the other version of how not to invest that we had.

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And we crowdsourced it and did a focus group.

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Turns out everybody liked that one better.

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They didn't like me going, how not to invest for some reason, which I find very strange.

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So listen, our how not to invest story today is this one right here.

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Andrew Tate liquidated eight times in 16 hours.

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The BTC trades that cost him thousands.

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So for anyone who doesn't know Andrew Tate, he's the self-proclaimed top G, former kickboxer turned internet life coach who built an empire teaching young,

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insecure men how to be rich, disciplined, and chauvinistic.

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And today's lesson is how to turn $100,000 into $14,000.

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Subscribe now.

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Right?

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So what happened here?

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First of all, he's been liquidated 108 times historically on hyper liquid,

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but he was liquidated another eight times in the last 16 hours using 40X leverage on $100,000 position,

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flipping back and forth from long to short, missing on every single small move.

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Ladies and gentlemen, he may think he's the top G, but I highly encourage you to avoid trading like the bottom G.

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Guys, we have a lot going on in the crypto markets right now.

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Nothing more than what's happening with STRC and SEDA.

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We will keep watching to see if these float back to par or not.

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We got a whole weekend to mull it over because that's it today.

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I'll see you on Monday for the next Daily Wolf.

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Peace.

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