It Started With Oil
The chain reaction began on Monday, Sept. 28, when President Donald Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz. As a result, Brent crude climbed back above $100 a barrel, up 3.2% on the day.
Higher oil means stickier inflation, and markets moved fast to price that in, with the CME Fedwatch tool showing traders assigning a 70.3% probability to an October Federal Reserve rate hike, up from 64.2% a day earlier, per a USAGOLD market report. The 10-year Treasury yield climbed back above 5.2%, while the 30-year topped 5.3%.
Lastly, Bitcoin.com News recently asked whether oil really moves bitcoin’s price, and the answer was a “no and yes.” This week landed firmly in the “yes” column.
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Rising yields hit precious metals as well, with Gold falling 3.4% on the day, a move The Kobeissi Letter called “one of the rarest single-day declines of the last two decades.” Since 2006, gold’s average daily change has been +0.05% with a standard deviation of 1.19%, which puts Monday’s drop about 2.9 standard deviations below normal.
Spot gold sank to $4,148.69 an ounce, its lowest level since Aug. 5, while silver slid 4.31% to $61.53. Furthermore, Bitcoin.com News reported yesterday that gold and silver shed $550 billion in hours as bitcoin dipped to $82,780, but the bleeding did not stop there.
The Leverage Flush
Crypto walked into today carrying plenty of borrowed money, as bitcoin had just logged its best weekly close since January, and spot bitcoin exchange-traded funds (ETFs) pulled in $2.39 billion last week, their strongest week since October last year.
In sum, optimism was high, and so was leverage. But then the floor gave way as $BTC fell below $83,000 in Asian trading on Sept. 29, subsequently recovering to near the $83,250 mark.
Altcoins such as QNT, ONDO and NEAR experienced drops between 13% and 20%, all while roughly $500 million in crypto positions were liquidated over 24 hours, hitting 129,197 traders.
Lastly, derivatives data showed bitcoin futures open interest, the total value of outstanding contracts, down to 650,000 $BTC, its lowest since March. Funding rates turned negative across major exchanges as well (with 53.1% of taker volume sitting on the short side).
That said, not everyone seems to be heading for the exit, with Binance seeing 13,800 $BTC exit the exchange in a single day, possibly to a long-term, cold storage medium.