🔻 There is no Bounce, I Love You

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GM, we’re living through epochal times.

You’re probably wondering what the hell just happened. Don’t worry—everyone is. And yes, Mercury is in Retrograde today.

First of all, this all begins with the definitive blow-up of a long-sustaining Japanese carry trade. Put simply, the carry trade means investors borrow cheap money from a low-interest-rate environment (Japanese Yen in this case) and invest it in a high-interest-rate environment, typically the US dollar. So, if you borrow money cheaply and invest it in foreign stocks or currencies, what happens if that money suddenly isn’t that cheap? Yep, a massive unwind of that foreign investment. 

And here we are—on one side, the Bank of Japan raised interest rates; on the other, Jerome Powell didn’t cut to balance things out. The massive 20 trillion dollar “carry trade” is blowing up as we speak.

Here goes the damage: Japan’s Nikkei index plunged and crashed the hardest since 1987. Then we’ve got Taiwan, selling the most since 1967. Third, South Korea put in emergency circuit breakers and halted all sell orders. Ah, the perks of centralized markets. 

We’re in crypto, though; there is no break (I love you). So, as is tradition, crypto traders were liquidated for around 1 billion dollars during the last 24 hours. 

Let’s reassess this situation tomorrow. For now, the Volatility Index is pumped all the way to 50, and it’s highly possible we’re not out of the woods yet. Good luck out there.

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VIX (middle) & BTC Index (top)

The S&P Volatility Index tracks US market volatility. At these levels - VIX greater than 30 - tradfi does not want to own risk assets. They will convert risky bags to cash to cover margin calls and protect capital.

On the plus side, as you can see above, big spikes like this have marked two major bottoms and one local bottom in 2018 (followed by a punishing bear market).

Trying to snipe the bottom is not recommended. Wait for $BTC to show signs of reversal, preferably confirmed on a higher timeframe. 

Come by the Lucky Luke Discord channel for comments, to roast my picks or to pump your own bags. All banter is welcome any time!

DeFi Remains Strong 

What we’re seeing today is an absolute all-around carnage. But there’s at least something good to note here, and it’s something that can be tested only in times like these: 

The DeFi ecosystem stands absolutely unaffected (for now). We’re seeing dumps in prices, of course, but more importantly, there are no major stablecoin or LST depegs. Let’s hope everything continues on this trend because we all know a DeFi blow-up is the last thing we need right now.

Not only that, but DeFi protocols like AAVE thrive under pressure and activity. As of the last 24 hours, AAVE made a nice $6M worth of revenue.

The important bits.

• Ether.fi (LRT) - Record ETH withdrawals are currently ongoing - read

• Curve (DeFi) - CRV locking set to outpace emissions on August 14 - read

• Timeswap (DeFi) - Lists apxETH pools - read

• Fantom (L1) - Officialy rebrands to “Sonic Labs” - read

• Elixir (DeFi) - Announces change in farming terms - read

Even more important bits.

• Robinhood halted 24H trading - read

• Vitalik market sold 45 ETH worth of NEIRO, received as a gift - read

• Warren’s Buffet cash is now worth more than all of Ethereum - read

• Lockheed Martin stock is pumping hard - read

• Kamala odds to win the presidential elections have jumped to 46% - read

• M2 Money Supply has broken out - read

Life gets busy so here’s what you’ve missed.

Polymarket: The App That Goes Beyond Crypto

Suspect most of you don't live under a rock and have already had some fun on Polymarket.

But if you're in the dark and don't know where to start with the monster being built by Shayne Coplan and team, this is the article for you.

Read More →

To save you doom scrolling.

Fortunately, Heart provided us with a very simple explanation of the Japanese carry trade. Take a listen:

If you suffered painful losses today, my personal message to you is to never give up. I have experienced blowups multiple times, and it’s one of the worst feelings ever. But there is always a way to bounce back— NEVER give up.

Let’s end this with a nice wisdom quote from Cobie:

“I don’t know who said it, but I remember a long time ago a tweet that said something like: ‘You act too quickly when you’re trying to grow capital, and you act too slowly when you’re trying to protect capital.’ And it really changed my life, tbh…”

Lesson in there…

stay safe homies,

Hix0n 🫡