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The Kobeissi Letter Profile picture
@KobeissiLetter
Feb 25 • 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) Image
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? Image
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. Image
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. Image
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. Image
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. Image
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. Image
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. Image
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. Image
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. Image
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. Image

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More from @KobeissiLetter

The Kobeissi Letter Profile picture
Jun 23
Iran's response has begun:

After US strikes on Iranian nuclear facilities, Iran just attacked US military bases in Qatar and Iraq.

Meanwhile, oil prices just CRASHED over -6% on the news.

Why? Markets are saying EVERYTHING you need to know. Let us explain.

(a thread) Image
Iranian media just announced that Iran has launched operation "Annunciation of Victory."

Iran's Armed Forces said they will not leave any attack on Iran unanswered.

This was Iran's first response to the US since the 3 strikes conducted by the US Airforce this weekend. Image
The initial reaction by markets was a selloff in stocks and a jump in oil prices.

The most common thought process here is than an Iranian response is escalatory.

But, this did NOT last long.

In fact, the market is painting the EXACT OPPOSITE situation right now.
Read 12 tweets
The Kobeissi Letter Profile picture
Jun 22
MAJOR news from Iran:

Iran's parliament officially approves CLOSING the Strait of Hormuz for the first time since 1972.

If approved by Iran's top security body, shipments of 20+ MILLION barrels of oil PER DAY will be impacted.

What's next? Let us explain.

(a thread) Image
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. Image
After US strikes on Iran last night, 50+ large oil tankers were scrambling to leave the Strait of Hormuz.

Markets have been closed, but an immediate drop in supply is expected to send prices higher.

JP Morgan described this as their worst case scenario in the Israel-Iran war. Image
Read 13 tweets
The Kobeissi Letter Profile picture
May 25
What is happening in Japan?

In 45 days, Japan's 30Y Government Bond Yield rose a MASSIVE +100 basis points, to a record 3.20%.

Over $500 BILLION worth of "safe" 40Y Japanese Government Bonds have lost 20%+ in 6 weeks.

Is Japan's bond market imploding?

(a thread) Image
What's happening in Japan is not "normal."

Japan's 40Y government bond that was yielding ~1.3% two years ago is now yielding 3.5%.

As yields continue to surge, inflation has begun to rebound and Japan's economy is decline.

It appears Japan is entering a recession. Image
The surge all began when the Bank of Japan (BOJ) made a major policy shift.

After years after BUYING bonds, the BOJ stopped doing so.

This resulted in much more bond supply hitting the market, which drove yields higher.

And, the BOJ has a colossal balance sheet still. Image
Read 15 tweets
The Kobeissi Letter Profile picture
May 23
The trade war is back:

After a brief pause, Trump just threatened 50% tariffs on the EU beginning June 1st and 25% tariffs on Apple.

In 5 days, the S&P 500 has erased -$1.5 trillion of market cap.

What's next? Here's why you NEED to watch the bond market.

(a thread) Image
First, at 7:19 AM ET today, President Trump made the below post.

As Apple, $AAPL, has moved iPhone production to India, Trump said this was not acceptable.

Trump says iPhones must be made in the USA or face tariffs of at least 25%.

The S&P 500 to 5820 on this news. Image
24 minutes later, President Trump made the below post.

He said he is "recommended a straight 50% tariff on the EU, staring June 1st."

This was the first escalation since the 90-day tariff pause and it sent S&P 500 futures down to 5750.

But, why now? Image
Read 13 tweets
The Kobeissi Letter Profile picture
May 21
What just happened?

At 1:00 PM ET, the S&P 500 fell nearly -80 points in 30 minutes without any major "news."

What actually happened was a weak 20Y Bond Auction which sent US Treasury Yields soaring.

Investors MUST watch yields here. Let us explain.

(a thread) Image
The US frequently conducts bond auctions, where investors can buy US Treasuries (debt).

Today, the US conducted a $16B auction of 20Y Bonds.

Typically, these auctions happen with minimal impact on markets.

However, today was different which sent yields soaring. Image
Today was different because demand for the bond auction was weak.

In other words, investors wanted to buy these bonds for LESS than initially expected.

The high yield came in at 5.047%, well above expectations of 5.035%.

When bond prices fall, yields rise, as we just saw. Image
Read 14 tweets
The Kobeissi Letter Profile picture
May 17
It's official:

For the first time in history, Moody's has downgraded the United States' credit rating.

Moody's cites concerns over soaring US debt levels with interest on US debt set to hit 30% of REVENUE by 2035.

What does it all mean? Let us explain.

(a thread) Image
This isn't the first time the US has seen a credit rating downgrade.

In 2011, S&P downgraded the US' credit rating from AAA to AA+.

As seen below, the downgrade came with an ~8% drop in the S&P 500 in 2 months.

The 10Y Yield fell as much as ~35% within the first 2 months. Image
In 2023, Fitch downgraded the US' long-term credit rating from AAA to AA+.

They cited concerns over rising US debt levels, unaddressed fiscal challenges, and Fed rate hikes.

This seemed to pave the path for the historic Moody's downgrade that we just received. Image
Read 13 tweets

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