Wintermute: Marginal sell orders in crypto are nearly exhausted, but it is still not advisable to go heavy in betting on a strong rebound.

Wintermute noted in a post that the Federal Reserve held the federal funds rate steady last week, helping stabilize U.S. equities, in part due to the completion of large forced sell-offs. Leveraged AI fund Situational Awareness sold its disclosed holdings to Citadel at a discount. After AI infrastructure longs were crushed and AI software shorts were squeezed, chip stock sell-offs had become self-reinforcing, but the handover of positions allowed the market to absorb the Fed’s hawkish hold. The crypto market was relatively resilient: Strategy once again sold Bitcoin to cover preferred stock dividends, a firmware vulnerability in Coldcard led to the theft of large Bitcoin holdings from users, and altcoins continued to be offloaded. The sequence of U.S. equities releasing pressure first and crypto markets following aligned with prior assessments; major cryptocurrencies pulled back less than 4% amid multiple shocks, indicating marginal selling pressure is nearly exhausted. Heavy positioning to bet on a strong rebound remains inadvisable, but holdings and options data suggest some market participants may have been caught off guard by a short-term technical rally. This week, focus will be on ISM services and non-farm payrolls data; the Jackson Hole Symposium is the last clear signaling window from the Federal Reserve ahead of the September rate decision. Institutional OTC spot trading volume has risen to a record 72%, with liquidity further concentrating in mainstream assets.