Yesterday was the worst day in digital

credit history. Michael Saylor's STRC

traded down to almost $82 when it's

intended to trade at par at 100.

Competitor Seda traded down to the low

90s before also bouncing. Today we're

going to discuss what happened, why it

happened, and what it means for the

market. Let's go.

What is up everybody? Welcome to the

Daily Wolf on Yahoo! Finance. I am your

host Scott Melker, also known as The

Wolf of All Streets. As you know, we

take 15 minutes every single weekday to

dive into the news that's moving crypto

and macro markets, and we try to discern

what is signal from noise. We have a lot

of noise in the market right now, a lot

of bad takes what about what's going on.

So, we're going to try to dig in and

figure out what the actual signal is and

what's actually happening. Now, as I

mentioned at the beginning, we had a

pretty bad day yesterday for preferred

around Bitcoin. Now, to be honest,

Bitcoin trading kind of sideways,

slightly down. We all know that it's

trading around the 200 MA, which is

historically been a great bottoming

signal. So, Bitcoin itself remaining

resilient, but it's hard not to notice

all of the noise around the products

that are built around Bitcoin. Now, as I

mentioned, we had the STRC and Seda

crashes yesterday. We have a great tweet

here from the CEO of Strive, Matt

Hougan. His product is Seda. Now, you'll

remember there's been a rotation into

Seda. It's been trading near par. Matt

is a long-time bond trader and portfolio

manager, has never underperformed the

market. He really knows exactly what he

is doing here. As I've told you before,

Seda and Strive is the only product that

they have right now for buying Bitcoin.

They don't have the luggage that many

people perceive strategy to have. They

don't have all of the other debt and the

other products. So, people are viewing

this potentially as a superior product.

This is what he said. Today was the most

difficult day in the history of digital

credit. STRC traded as low as 8250, SATA

traded from par down to the low 90s

before rebounding. Both of them

rebounded massively, which is a pretty

interesting tell.

Now, here's what he had to say that I

find even more interesting. What

happened today was a leverage

liquidation event, not a deteriorate

deterioration in underlying credit

quality. There's an old saying in income

markets that the road to hell is paved

with carry. When investors discover an

asset that offers attractive yields,

relatively low volatility, and strong

underlying credit characteristics, many

eventually decide that owning it is not

enough. They borrow against it, they

lever it, they attempt to enhance the

carry. That works until it doesn't. Now,

anybody who is crypto native, who has

ever watched price action on Bitcoin,

knows exactly what they're talking about

here when you see a liquidation cascade

of leverage. Most famously in crypto

when Bitcoin broke below $6,000 in March

of 2020 on the COVID scare, we saw

Bitcoin rocket down to almost $3,000.

The main exchange at the time for swaps

was BitMEX. They literally turned the

exchange off and said it was for

maintenance because their order book was

firing liquidations into no buy orders.

So, the price of Bitcoin would have

literally gone to zero on BitMEX that

day if they didn't turn the exchange

off. It was liquidating into an empty

book. We've seen this not to that

dramatic level in markets since the

beginning of time, even with treasuries,

which are viewed to be stable, but that

doesn't mean that the Treasury all of a

sudden is bad credit. It's the trading

and leverage that is around it. So, the

question is, if this was a liquidation

cascade, who was likely doing it? We

have another take on that here from

Jesse Myers.

Who says, "Strategy is fine. If

everything stays as is, they can pay S T

R C dividends for 32 years. So, anyways,

why the sell-off? This appears to be a

liquidation cascade." Same idea. "Over

the last 6 months, the narrative became

that S T R C volatility was reducing and

price began to spend all its time in 99

to $100 range. This invites leverage. If

you expect the price to always be north

of $95, you can take on 20X with your

portfolio to buy more S T R C and

dramatically increase the yield on your

portfolio. This works great until it

doesn't. Seems familiar, right? This is

the killer, though. S T R C is designed

as a free-market asset. When attention

shifted to S E D A and S T R C price

flagged, it may have raised the

attention of opportunistic short-selling

hedge funds. By shorting aggressively,

they could push the price down and start

triggering margin calls and liquidations

from folks who aggressively levered up

their S T R C positions. Same idea from

a different voice, and we know that Wall

Street's favorite short on the planet

for a very long time was M S T R or

strategy, literally the most shorted

stock stock on Wall Street for a very

long time, and taking the same playbook

to S T R C. Now, the

favorable view of that on the other side

is that if they short it down and cause

a cascade, they're also usually the

buyer at the lows. And if they can short

it down to 8250, buy it 8250, it goes

back to par, they've captured $17.50

on that move and the yield that's on top

of it. Now, a lot of people proposing

different solutions. I've talked about

this one before. I am going to highlight

it here from Jeff Dorman from Arca. Now,

I will say that I was an investor in

Arca and they went all in on Luna during

the crash as it was crashing, so not

sure that this is the best person to

speak on risk management.

But, he basically believes that they

need to sell an enormous amount of

Bitcoin and MSTR to help bring STRC back

up near par and at least buy some time,

continue to watch every part of your cap

structure melt because of the

uncertainty you've created. So,

basically saying they should sell off a

few billion dollars worth of Bitcoin,

shore up their cash reserves, send STRC

back up to par, and start again. I don't

think that's what's going to happen. I

don't think it's going to be needed. I

do think that STRC will slowly float

back up to par, but as you can see, this

has become the hot topic right now. Now,

some of the bad narratives, obviously,

people are saying this is just like

Terra Luna from 2022. Run. I mean, Terra

Luna was backed by vibes and prayer and

random bag of Skittles.

Right? I mean, STRC here is backed by

846,000

Bitcoin. This is not the same disease.

Now, we may have a fever,

but it's not the same disease, and

comparisons like that are complete and

utter and absolute nonsense. So, moving

on from that, we're going to see what

happens with STRC and what happens, of

course, with SEDA. So, the next story

here, we have US agencies seek

stablecoin customer ID rules akin to

banks in new genius act pitch. Now, this

is pretty wild. This is the Fed,

Treasury, OCC, FDIC, and FinCEN jointly

proposing a rule requiring US stablecoin

issuers to identify customers like

banks, full Bank Secrecy Act treatment

here. So, that means they will know

exactly who uses a stablecoin with full

KYC and AML, what they did with it, full

transparency into your wallet.

Crazy here. We spent a decade terrified

that the government would build a coin

to spy on us with a central bank digital

currency. Instead, what we did

effectively was build it ourselves,

handed a copy to Visa and Tether, and

called it freedom.

We didn't dodge the surveillance state

here. We basically franchised it. Right?

Now, this is interesting because we

cheered the GENIE Act as an industry.

Even I was a part of that until I talked

to former CFTC Chairman, my friend Chris

Giancarlo, just a few months ago. I'm

going to play a video for you of exactly

what he said about the GENIE Act.

>> However, I will say, and I supported the

GENIE Act, I'm disappointed in it,

however, in that it doesn't address the

issue of privacy. In fact, the word

privacy doesn't appear in the GENIE Act.

Unfortunately, with the GENIE Act, we

got the worst. We got both surveillance

by stablecoin operators, which is not

prevented, and surveillance by

government through the Bank Secrecy Act.

Now, arguably, if the government had

said, "No, we're going to actually have

the government do a central bank digital

currency," well, our Fourth Amendment

would have protected it from government

surveillance. And since it was done not

by a commercial actor, you wouldn't have

had commercial surveillance.

Unfortunately, we've got both commercial

surveillance and government surveillance

built into

>> You're basically saying that we ended up

through a Trojan horse or backdoor with

completely public stablecoins where

they'll still be able to view all of our

transactions. We did not replicate cash

Right. In a digital manner, and we don't

Maybe the the thing that we let in is

the dystopian uh CBDC we were concerned

about in the past.

So, yeah, we have feared a central bank

digital currency. We have cheered

governments that have banned them. We've

railed against China and the ECB, who

have tried to create them. China

actually has one because we know they're

a violation of privacy and not cash.

What we actually did with the GENIE Act

was give private companies complete

transparency into everything that we do,

and they can then give that information,

and have to, to the government, who has

complete transparency into exactly what

we do. Bitcoin

decentralized networks are more like

cash, which people like to use. There's

nothing wrong with wanting to have

private transactions.

Right now, stablecoins are more

dystopian and more like a central bank

digital currency, and that's only

getting worse if these agencies get what

they're asking for here. Now, I told you

a story that's a continuation of this,

and we didn't realize it at the time.

Yesterday, I told you a story about how

Binance was effectively at risk of being

kicked out of the European Union

entirely because they tried to go

through Greece, which was supposed to be

the fast path, and they may get rejected

there, meaning that they can only go to

France. We have more information on why

that may have happened, and that is

this.

European Central Bank's Lagarde, she's

the head of that Central Bank, said to

have pushed Greece to block Binance's

MiCA

bid.

Now, why does this matter? Because

to the point of the last story, there is

no more vocal proponent for central bank

digital currencies than Christine

Lagarde. She believes that the European

Union should have a central bank digital

currency, that you should have your

wallet be completely visible for every

transaction you do to them. Not only

that, she sees stablecoins as a threat

because stablecoins in the United States

mean more hyper dollarization, means

that more people use dollars and not the

euro. So, she has aggressively been

rallying against the crypto industry and

specifically against dollar-backed

stablecoins because she wants the even

more dystopian version.

So,

really interesting when you see us

looking in our country to get more

visibility into your wallets, and

Christine Lagarde doing the same over

there, and her specifically stepping in,

which has no business doing, to block

Binance from getting approval in the

European Union

is just another step in that same war

against the crypto industry in Europe.

So, obviously some of these exchanges

will get their licenses, OKX,

Kraken, Coinbase, and others. They're

going to be compliant, but Binance is

the largest and by blocking them,

especially knowing the way that people

use Binance, she's trying to stop

stablecoins. Now, what I just said there

is important because I've interviewed CZ

multiple times, the former CEO and

founder of Binance. And when I asked him

where their hundreds of millions of

customers come from, he says most of

them are using this like a wallet to

send each other small amounts of

stablecoins.

Right? That is the activity that people

are primarily using these exchanges for.

Yes, many people are trading, many

people are buying and holding and

selling different tokens, but primarily

people are using this as their digital

wallet in countries where they don't

necessarily have access to dollars to

send dollars back and forth to one

another.

Huge signal here when you see the head

of the European Central Bank who hates

stablecoins and who hates the industry

stepping in personally to block the

biggest exchange from having access to

her entire

continent. Now, you know we love nothing

more on this show than our segment

called

How not to invest. Hit it.

>> How not [music] to invest.

>> How not to invest.

>> Okay, God. So, this morning on my

YouTube show at 9:00 a.m., I just kind

of wing it on Fridays and for like 10

minutes we played that video and the

other version of how not to invest that

we had and we crowdsourced it and did a

focus group. Turns out everybody liked

that one better. They didn't like me

going, "How not to invest?" for some

reason.

Which I find very strange. So, listen,

our how not to invest story today is

this one right here. Andrew Tate

liquidated eight times in 16 hours. The

BTC trades that cost him thousands. So,

for anyone who doesn't know Andrew Tate,

he's the self-proclaimed top G, former

kickboxer turned internet life coach,

who built an empire teaching young

insecure men how to be rich,

disciplined, and chauvinistic. And

today's lesson is how to turn $100,000

into $14,000.

Subscribe now. Right, so what happened

here? First of all, he's been liquidated

108 times historically on hyperliquid,

but he was liquidated another eight

times in the last 16 hours using 40x

leverage on a $100,000 position flipping

back and forth from long to short

missing on every single small move.

Ladies and gentlemen, he may think he is

the top G, but I highly encourage you to

avoid trading like the bottom G.

Guys, we have a lot going on in the

crypto markets right now. Nothing more

than what's happening with STRC and say

that we will keep watching to see if

these float back to par or not. We got a

whole weekend to mull it over cuz that's

it today. I'll see you on Monday for the

next Daily Wolf. Peace.