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The Kobeissi Letter

Feb 25, 2025 • 11 tweets • 4 min read • Read on X

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Did liquidity in crypto just dry up?

Crypto markets have now erased -$325 BILLION of market cap since Friday morning.

At 5:00 PM ET today, crypto lost -$100 billion in 1 HOUR without any major headlines.

What is happening with crypto? Let us explain.

(a thread)

Over the last 24 hours alone, we have seen ~$150 billion liquidated from the crypto market.

Selling has broadened with just about all crypto assets falling sharply.

Even the memecoin market appears to have lost a significant portion of its liquidity.

So, what's happening?

It appears to have all began with Solana which is now down -22% since Friday.

Amid the memecoin frenzy, Solana saw extreme relative strength.

However, as memecoins began to fade, Solana also began to fade.

For a while, selling in Solana was largely isolated from Bitcoin.

However, as the S&P 500 began selling off on Friday, Bitcoin joined the downward move.

As seen below, the drop in the S&P 500 came with an acceleration of selling in Bitcoin.

Now, Bitcoin is losing its relative strength after breaking below $98,000 support today.

It's rather strange that this comes hours after Citadel made a major pivot on their crypto stance.

Today, Bloomberg announced that $65 billion Citadel Securities is looking to become a liquidity provider for Bitcoin and crypto.

Markets took this as a "sell the news" event.

It also seems that the Bybit hack on February 21st has dampened sentiment in the market.

Arkham Intelligence has declared this hack the "largest financial heist in history."

The closest competitor is the theft from the Central Bank of Iraq, which lost $1B in March 2003.

In fact, the Bybit hack more than DOUBLED the 2nd largest hack in crypto history.

PolyNetwork's $611M hack in August 2021 was previous largest crypto hack.

Weakness seen in Ethereum has also put more pressure on broader crypto markets.

Hacks deteriorate confidence.

The technical picture also appears to have lost momentum.

However, this also does not mean that crypto markets are set for a prolonged bear market.

We have seen countless -10% pullbacks in Bitcoin over the course of this bull run.

Technical pullbacks are healthy.

And, to top it all off, Sam Bankman-Fried is back on X.

Amid the crypto crash, SBF returned to state he has "a lot of sympathy for government employees."

This comes as DOGE and Elon Musk prepare for more mass layoffs in the federal government.

Lastly, as volatility returns to equity markets, risky assets like Bitcoin are pulling back.

We saw historic levels of risk appetite in 2024 and heading into 2025.

A pullback in risk appetite means less liquidity for crypto markets.

This has certainly happened before.

Overall, there really isn't one specific factor pushing crypto lower right now.

Rather, its a combination of factors which have resulted in reduced liquidity.

Crypto markets need LIQUIDITY to thrive.

Follow us @KobeissiLetter for real time analysis as this develops.

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More from @KobeissiLetter

The Kobeissi Letter

@KobeissiLetter

Feb 28

The Strait of Hormuz situation:

Reuters is now reporting that Iran is notifying vessels that it is CLOSING the Strait of Hormuz.

If officially closed, 20+ MILLION barrels of oil PER DAY will be impacted, or 20% of global supply.

What's next? Let us explain.

(a thread)

The Strait of Hormuz, between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.

This body of water controls ~20% of the world’s petroleum liquids consumption.

In other words, ONE FIFTH of global oil consumption flows through here EVERY DAY.

After US strikes on Iran last night, ships in the Strait of Hormuz are now receiving warnings.

As of 12:30 PM ET, the US has recommended ships avoid the Strait of Hormuz.

In their 2025 analysis, JP Morgan described this as their worst case scenario in an Israel-Iran war.

Read 13 tweets

The Kobeissi Letter

@KobeissiLetter

Feb 20

It's official:

In one of the most anticipated rulings in decades, the US Supreme Court has ruled President Trump's "emergency" tariffs ILLEGAL.

This exposes the Trump Admin to a potential $175+ BILLION in "tariff refunds."

What happens next? Let us explain.

(a thread)

After 5+ months, the Supreme Court's ruling was released.

The Court ruled IEEPA does NOT authorize the President to impose tariffs.

IEEPA is the law Trump used to impose tariffs, which gives him "special economic powers" during a national emergency involving foreign threats.

The market's initial reaction has been positive, but not that strong.

The S&P 500 rose nearly +1% and silver prices are up +5%, but that's a fairly muted reaction to such a big ruling.

But, why?

As we explain below: there is much more to this ruling than the headline.

Read 13 tweets

The Kobeissi Letter

@KobeissiLetter

Feb 5

What is happening in crypto?

Since October 10th, crypto markets are now down -50%, erasing $2.2 TRILLION worth of market cap.

Bitcoin has officially erased ALL of its post-election rally, now down -10% since Trump's election.

Why is it crashing? Let us explain.

(a thread)

As of 8:00 AM ET today, Bitcoin has officially erased its post-election rally.

Yet, over the last 60 days, the fundamental picture for crypto is actually vastly unchanged.

This is why many investors are confused.

Why is crypto crashing if the fundamental picture is unchanged?

The answer to this question requires going back to October 10th.

The most recent TOP in crypto came on October 6th, just 4 days before the -$19.5 billion record liquidation.

Something structural appears to have shifted on October 10th.

And, markets never truly recovered.

Read 12 tweets

The Kobeissi Letter

@KobeissiLetter

Jan 20

This is unprecedented:

If President Trump acquires Greenland and "controls" Venezuela, the US would gain control of 1.2 MILLION square miles of land.

This is ~42% larger than the Louisiana Purchase, the largest US acquisition ever.

What's next? Let us explain.

(a thread)

It was an incredibly busy weekend.

On Saturday, Trump announced new 10% tariffs on eight European countries amid his push for Greenland.

Trump says these tariffs rise to 25% on June 1st.

They will remain until a deal is reached for "complete and total purchase of Greenland.”

The result was a series of escalations on the trade front and the EU threatening to retaliate.

Now, the EU Parliament is looking to end the 2025 US-EU trade deal.

Trump proceeded to double down, saying US acquiring Greenland is "imperative for national and world security."

Read 12 tweets

The Kobeissi Letter

@KobeissiLetter

Jan 7

Trump is going after the US housing market:

President Trump just announced he is BANNING single-family home purchases by institutional investors.

Within minutes, Blackstone's stock erased as much as -$17 BILLION today.

What happens next? Let us explain.

(a thread)

For years, investors have been upping purchases of single-family homes in the US.

At the start of the pandemic in 2020, investors saw purchases account for ~14% of transactions.

Now, that share is up to ~27% as the market has become increasingly unaffordable for buyers.

As a result, the median age of a first-time homebuyer in the US has surged to a record 40 years old.

This is up from a median age of 33 years old in 2021 and 29 in 1981.

But the question now becomes:

Is this the result of large institutional funds buying houses?

Read 12 tweets

The Kobeissi Letter

@KobeissiLetter

Jan 4

The Venezuela plot thickens:

While Venezuela holds 303 BILLION barrels of oil reserves, much of this is HEAVY crude oil.

Texas and Louisiana also *happen* to have 6 of the LARGEST HEAVY crude oil refineries in the world.

What does this mean? Let us explain.

(a thread)

In the early 2000s, Venezuela was a MUCH larger oil producer than the US.

In fact, Venezuela produced 3 TIMES as much oil, at nearly 3.3 million barrels per day.

By 2020, Venezuela's production had declined to just 900K/day, while the US hit 5 million/day.

This is key.

First, Venezuela has been heavily sanctioned by the US for years.

This resulted in old infrastructure, hindering the ability to extract HEAVY crude oil.

Heavy oil is far more expensive to extract than light crude.

This requires advanced techniques like steam injection.

Read 12 tweets

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