Derive and Strands Introduce Off-Exchange Custody for On-Chain Derivatives
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Derive and Strands Introduce Off-Exchange Custody for On-Chain Derivatives
Institutions can now manage risk using on-chain options and perpetual contracts while assets remain in cold storage.
Navigating Web3 tides with focused insightsOn February 6, U.S. dollar asset investors struggled to sleep.
Opening their trading apps revealed a sea of red across the screen. Bitcoin plunged to $60,000 at one point—a 16% drop within 24 hours—and had already fallen 50% from its previous all-time high.
Silver plummeted like a kite with its string cut—down 17% in a single day. The Nasdaq tumbled 1.5%, and tech stocks were battered across the board.
In the crypto market, 580,000 traders were liquidated, wiping out $2.6 billion in value.
But the strangest part? No one knows exactly what happened.
There was no Lehman Brothers collapse, no black swan event—not even a credible piece of bad news. U.S. equities, silver, and cryptocurrencies—all three asset classes—plunged simultaneously.
When “safe-haven assets” (silver), “tech faith” (U.S. equities), and “speculative casinos” (cryptocurrencies) all crash together, the message the market may be sending is stark: Liquidity has vanished.
U.S. Equities: The Bubble Bursts During Earnings Season
After market close on February 4, AMD delivered an impressive earnings report: both revenue and profits exceeded expectations. CEO Lisa Su declared on the earnings call: “We’re entering 2026 with strong momentum.”
Then its stock crashed 17%.
What went wrong? Its Q1 revenue guidance ranged from $9.5 billion to $10.1 billion, with a midpoint of $9.8 billion—higher than Wall Street’s consensus estimate of $9.37 billion. By all logic, this should have triggered celebration.
But the market rejected it.
The most bullish analysts—the ones shouting “AI revolution” and assigning sky-high target prices—expected “$10 billion+.” A shortfall of just 2% was interpreted as a signal of “slowing growth.”
The result was a full-blown stampede. AMD dropped 17%, shedding tens of billions in market cap overnight; the Philadelphia Semiconductor Index plunged over 6%; Micron fell more than 9%, SanDisk dropped 16%, and Western Digital slid 7%.
The entire semiconductor sector was dragged down by a single company—AMD.
Before AMD’s wounds had even begun to heal, Alphabet delivered another blow.
After market close on February 6, Google’s parent company released its earnings. Revenue and profits again beat expectations across the board; cloud revenue grew 48%; CEO Sundar Pichai appeared buoyant, declaring: “AI is driving growth across all our businesses.” Then CFO Anat Ashkenazi dropped a bombshell: “In 2026, we plan to invest $175–185 billion in capital expenditures.”
Wall Street collectively froze.
This figure is double Alphabet’s spending last year ($91.4 billion) and 1.5 times higher than Wall Street’s expectation ($119.5 billion)—equivalent to burning $500 million per day for an entire year.
Alphabet’s stock plunged 6% after hours, then lurched erratically—rebounding briefly before falling again—to finally close flat. Yet panic and anxiety had already taken root across the market.
This is the real AI arms race of 2026: Google burns $180 billion; Meta spends $115–135 billion; Microsoft and Amazon pour money in at breakneck speed. The Big Four tech giants will collectively spend over $500 billion this year.
But no one knows where this arms race ends. It’s like two people shoving each other at the edge of a cliff—whichever stops first gets pushed off.
The Magnificent Seven’s 2025 gains came almost entirely from “AI expectations.” Everyone was betting: “Yes, valuations are high now—but AI will make these companies wildly profitable, so buying now isn’t a mistake.”
Yet once the market realizes “AI isn’t a money printer—it’s a money burner,” sky-high capital expenditures under elevated valuations become a Damoclean sword hanging overhead.
AMD was only the beginning. Every subsequent earnings report that falls short of perfection could trigger another round of panic selling.
Silver: From “Poor Man’s Gold” to Liquidity Sacrifice
Up 68% in one month—down 50% in three days.
Since January, silver has traced a curve that left everyone speechless.
It hovered near $70 at the start of the month—and soared to $121 by month-end.
Social media erupted in a “silver frenzy.” Reddit’s r/silver subreddit overflowed with “Diamond Hands” (die-hard holders), while Twitter feeds buzzed with posts like “Silver is going to the moon,” “Industrial demand is exploding,” and “Solar panels can’t function without silver.”
Many genuinely believed “this time is different.” Real-world industrial demand—solar panels, AI data centers, electric vehicles—combined with five consecutive years of supply deficits, looked like the dawn of silver’s golden age.
Then, on January 30, silver crashed 30% in a single day.
It plunged from $121 straight down to around $78—a single-day collapse not seen since the 1980 “Hunt Brothers incident,” when two Texas billionaires attempted to corner the silver market, triggering forced liquidations and a market meltdown.
Forty-five years later, history repeated itself.
On February 6, silver fell another 17%. Those who “bought the dip” at $90 watched helplessly as their capital evaporated yet again.
Silver is unique: it’s both “poor man’s gold” (a safe-haven asset) and an “industrial essential” (used in solar panels, smartphones, and cars).
In bull markets, this duality is a double blessing: strong economies boost industrial demand; weak economies fuel safe-haven demand—either way, price rises.
But in bear markets, it becomes a double curse.
The collapse traces back to January 30, when Trump announced his nomination of Kevin Warsh as the new Fed chair. Silver plunged 31.4% that day—the largest single-day drop since 1980.
Warsh is a well-known hawk who advocates maintaining high interest rates to control inflation. His nomination instantly defused market fears about “loss of Fed independence,” “monetary policy chaos,” and “runaway inflation”—fears that had been the core drivers behind gold and silver’s 2025 rally. On the day of Warsh’s nomination, the U.S. Dollar Index rose 0.8%, and all safe-haven assets—including gold, silver, and the yen—were dumped en masse.
Looking back, three events unfolded within 48 hours.
On January 30, the Chicago Mercantile Exchange (CME) suddenly announced margin requirements for silver would rise from 11% to 15%, and for gold from 6% to 8%.
Simultaneously, market makers began withdrawing.
Ole Hansen, Saxo Bank’s Head of Commodity Strategy, stated plainly: “When volatility spikes, banks and brokers exit the market to manage their own risk—and this retreat amplifies price swings, triggering stop-loss orders, margin calls, and forced liquidations.”
Most bizarrely, just as silver volatility peaked, the London Metal Exchange (LME) trading system suffered a “technical issue,” delaying its opening by one hour.
With all these events converging nearly simultaneously, silver collapsed from $120 to $78—a 35% single-day plunge—and countless traders were liquidated.
Was it coincidence—or a meticulously engineered “liquidity trap”? No one knows. But silver markets now bear another deep scar.
Cryptocurrencies: A Long-Deferred Funeral Finally Held
A one-sentence summary of recent crypto carnage: This is a long-deferred funeral.
Early February, Bitwise CIO Matt Hougan published an article titled bluntly, “The Depths of Crypto Winter.” His analysis concluded: the bull market ended in January 2025.
In October 2025, BTC surged to a record $126,000—prompting cheers of “$100K is just the beginning.” Hougan argued this brief bull run was artificially sustained.
Throughout 2025, Bitcoin ETFs and Digital Asset Treasury (DAT) firms collectively purchased 744,000 BTC—worth roughly $75 billion.
Compare that to Bitcoin’s 2025 mining output: ~160,000 BTC (post-halving). In other words, institutions absorbed 4.6 times the newly mined supply.
In Hougan’s view, absent this $75 billion in institutional buying, Bitcoin might have plunged 60% by mid-2025.
The funeral was delayed nine months—but it had to happen eventually.
So why did crypto fall hardest?
Within institutional “asset hierarchies,” there exists an unspoken ranking:
Core assets: U.S. Treasuries, gold, blue-chip stocks—sold last during crises.
Secondary assets: corporate bonds, large-cap equities, real estate—sold when liquidity tightens.
Periphery assets: small-cap stocks, commodity futures, cryptocurrencies—sacrificed first.
In liquidity crises, cryptocurrencies are always the first to go.
This stems from crypto’s inherent characteristics: highest liquidity (24/7 trading), instant convertibility into cash, lowest moral burden, and lightest regulatory pressure.
Thus, whenever institutions need cash—whether to meet margin calls, execute stop-outs, or comply with sudden mandates to “reduce risk exposure”—cryptocurrencies are the first assets sold.
As U.S. equities and silver reversed course into downtrends, crypto was swept along—liquidated not for its own fundamentals, but simply to cover margin requirements.
Still, Hougan believes the crypto winter has lasted long enough—and spring is surely near.
The True Epicenter: Japan’s Overlooked Time Bomb?
Everyone is searching for the culprit: Was it AMD’s earnings? Alphabet’s spending spree? Trump’s Fed chair nomination?
The true epicenter may have been planted as early as January 20.
That day, yields on Japan’s 40-year JGB surged past 4%—the first time since the instrument’s 2007 inception, and the first time any Japanese government bond yield had breached 4% in over 30 years.
For decades, Japanese government bonds served as the global financial system’s “safety cushion.” Yields hovered near zero—or even negative—rock-solid and stable.
Global hedge funds, pension funds, and insurers all played a game called the “yen carry trade”: borrow ultra-cheap yen in Japan, convert them to dollars, and buy U.S. Treasuries, tech stocks, or cryptocurrencies—profiting from the interest rate differential.
So long as JGB yields stayed put, the game continued. How big was the market? No one knows for sure—but conservative estimates place it in the multi-trillion-dollar range.
As Japan entered a hiking cycle, the carry trade gradually contracted. But after January 20, it plunged directly into hell mode—or outright liquidation mode.
Japanese Prime Minister Shigeru Ishiba announced snap elections, pledging tax cuts and increased fiscal spending. Yet Japan’s debt-to-GDP ratio already stands at 240%—the highest globally. With more tax cuts, how will Japan repay its debts?
The market exploded. Japanese government bonds were dumped en masse, sending yields soaring. The 40-year JGB yield jumped 25 basis points in a single day—a volatility level unseen in Japan for 30 years.
Once Japanese bonds imploded, the domino effect began:
The yen strengthened sharply—forcing funds that borrowed yen to buy U.S. Treasuries, equities, or Bitcoin to suddenly face skyrocketing repayment costs. They faced a binary choice: close positions immediately to cut losses—or wait for liquidation.
U.S. Treasuries, European bonds, and all “long-duration assets” were sold off in tandem, as investors scrambled for cash.
Equities, precious metals, and cryptocurrencies all suffered. When even “risk-free assets” are dumped, nothing else stands a chance.
This explains why “safe-haven assets” (silver), “tech faith” (U.S. equities), and “speculative casinos” (cryptocurrencies) collapsed simultaneously.
A pure “liquidity black hole.”
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