Wintermute Weekly Report: Fed Hawkish Divergence Continues, AI Mega Fund Forced Liquidation
TechFlow reports, August 4, according to the market weekly report released by market maker Wintermute (@wintermute_t), the macro and crypto markets experienced multiple shocks over the past week:
On the macro level, the Fed kept interest rates unchanged at 3.50-3.75% with a 9:3 vote. Officials Hammack, Kashkari, and Logan rarely voted together in favor of a 25bp rate hike, marking the second meeting since Chairman Warsh took office where divergence occurred. The 30-year US Treasury yield once touched 5.24%, hitting a new high since July 2007, while the 10-year yielded 4.67%. The yield curve bear steepening indicates market doubts about the Fed's inflation credibility.
On the stock market level, AI leveraged fund Situational Awareness (under Leopold Aschenbrenner) faced margin calls due to leverage as high as 400%. Its size plummeted from $45 billion in early July to about $10 billion, forced to sell all public positions to Citadel at a discount. Long positions in AI infrastructure such as SK Hynix and CoreWeave fell sharply, partially explaining the reason for the continuous decline in chip stocks in July.
On the crypto level, BTC fell 2.84% weekly and ETH fell 3.63% weekly, but Wintermute believes major sellers are nearly exhausted, and the pain trade direction has turned upward. ETH outperformed BTC for two consecutive months, with the ETH/BTC ratio rising to a three-month high; US spot BTC ETFs saw a single-week net outflow of $61.5 million, while ETH ETFs saw net inflows for four consecutive weeks. In addition, a Coldcard firmware vulnerability led to about $70 million worth of BTC being stolen, Strategy sold BTC again, the CLARITY Act was shelved, and Storj filed for bankruptcy.
Wintermute pointed out that this week's focus is on the August 5 ISM services data and the August 7 non-farm payroll report. The August 27-29 Jackson Hole meeting will be the last policy signal window before the September interest rate decision.
