The Daily: Crypto market selloff, calls for emergency rate cut, Capula and Bitcoin ETFs

I hope you had a good weekend, folks. In today's Daily, crypto drops heavily amid broader market fears, calls grow for an emergency Fed rate cut, Capula reports owning $464 million in spot Bitcoin ETF shares and more.

 

Let's get started.

• The total crypto market cap fell to just under $1.7 trillion, having started the day at just over $2 trillion, according to TradingView.
• Escalating tensions in the Middle East and worries about the global economy's strength appeared to erode investor confidence.
• Bitcoin fell below $50,000 at one point, though its dominance rose to 60% as other cryptocurrencies fell harder, with ether briefly losing all its year-to-date gains as it plummeted under $2,200.
• More than 289,000 traders were liquidated in the past 24 hours — with the total liquidations across centralized crypto exchanges amounting to $1.2 billion — according to data from CoinGlass.
• Meanwhile, on-chain liquidations on DeFi protocols like Aave reached over $350 million in the same period, concentrated in ether, wrapped staked ether and wrapped bitcoin collateral, according to Parsec.
• Funding rates for bitcoin and ether perpetual futures also turned negative — suggesting a higher demand for short positions and indicating that traders are betting on price declines.
• Prices had already begun their decent over the weekend amid increasing odds of Kamala Harris winning the upcoming U.S. election and Jump Crypto appearing to move hundreds of millions of dollars worth of crypto assets, including ether and USDT.

Experts call on the Fed for emergency interest rate cut

• However, a disappointing U.S. jobs report and recent macroeconomic factors have prompted some to advocate for an emergency rate cut.
• Wharton professor Jeremy Siegel urged the Fed to implement an emergency 75 basis-point cut in the federal funds rate now and another 75 bps cut in September.
• Meanwhile, deVere Group CEO Nigel Green called for a 25 basis-point cut right away to avoid the risk of a recession.
• However, Bitwise CIO Matt Hougan said an emergency rate cut is unlikely, suggesting a more measured approach by the Fed, with a 50 bps cut in September and more than 100 bps by the end of the year.

Hedge fund giant Capula reports owning $464 million in spot Bitcoin ETF shares

• Filed with the U.S. Securities and Exchange Commission on Monday, Capula's 13F report reflects the shares held as of June 30.
• However, amid significant price volatility, Capula's position in the spot Bitcoin ETFs is currently worth around $422 million.
• Other major hedge funds have also disclosed owning spot Bitcoin ETF shares, including Millennium Management, which reported earlier this year that it held nearly $2 billion worth of shares in these funds.
• London-based Capula is the fourth-largest hedge fund in Europe, with around $30 billion in total assets under management.

Sen. Warren, other Democrats press CFTC to 'promptly' finalize political event contracts ban

• The lawmakers argue that election bets "cheapen the sanctity" of the democratic process and replace "political convictions with financial calculations."
• The proposed rule would ban event contracts on political contests, gaming, war, terrorism and assassination, preventing them from being traded or cleared through a CFTC-registered entity.
• Event markets, such as Kalshi and Polymarket, allow users to bet on the outcome of future events, including the upcoming U.S. elections, seeing an uptick in activity over recent months.

Bernstein says bitcoin not to blame for crash, remains a 'Trump trade' ahead of US elections

• "Bitcoin's initial reaction as a 'risk off' asset is not surprising. This has often been the pattern for bitcoin markets (seen before in the March 2020 flash crash too), particularly, as it is the only market trading over the weekend," the analysts wrote.
• "We don't see any incremental negatives for crypto here. If rate cuts and monetary liquidity is the usual template response to U.S. recession fears, we expect 'hard assets' such as bitcoin (digital gold) to reprice up."
• Bitcoin remains a "Trump trade" ahead of the U.S. elections, with the market reacting to political catalysts and likely continuing range-bound until the election outcomes are clearer, the analysts added.

In the next 24 hours