Wasn't about the FED but about Binance

Macro

At the start of last week, we called the FED and PCE to be the big drivers of the week, however this turned out a little different with the Binance hack defining most of the market direction.

Starting with macro, Q3 GDP printed +3.4% annualized, above consensus, which is why the AI-linked sell-off became a rotation, with the Russell 2000 up 1.30% and the Nasdaq down 1.97% as most sectors outside tech finished higher. We read the week as concentrated stress in the AI complex against resilient data and elevated yields, with Binance as the one crypto-specific shock on top.

Gold finished last on the quilt at -2.95%, ahead of altcoins (-2.76%), Ethereum (-2.31%) and Bitcoin (-2.22%), while 20Y+ Treasuries gained 0.61% and Brent 0.56%. Gold’s drop shows the pressure on non-yielding assets reached beyond crypto, so we read part of the crypto weakness as macro but the majority was still driven by the Binance news on Thursday.

The Fed held at 3.75-4.00% on a 10-2 vote with both dissents for a hike, and September core PCE at +3.1% y/y (headline +3.6%) came in as expected with no sharp reacceleration, so the hawkish dissent gained no fresh support from the data.

Intel’s roughly 29% drop on weak guidance and Alphabet’s sharp fall revived doubts about AI capex because the prints showed negative free-cash-flow turns, heavy debt issuance and rising power costs. The Nasdaq’s lag behind the S&P 500 widened after those earnings and fed the rotation into small caps.

Brent edged higher on Houthi-related activity in Saudi Arabia and supply concerns, which ranked behind the AI trade in impact. We flag it because sustained elevated oil feeds core inflation and could shift the Fed’s stance. However as we’re writing this, Brent is falling as the US and Iran “allegedly” are nearing a deal.

Midterms on 3 November had no realized price impact last week. Since 1950 the S&P 500 has been positive in the 12 months after every midterm, averaging about 15%, usually after a deeper drawdown during the midterm year.

Crypto entered Thursday already soft on that backdrop, and the Binance hack on 29 October landed on top of it, putting pressure on the crypto market as some concerns linger.

Digital Assets

Binance lost about $6.3B on 29 October, attributed to North Korea-linked TraderTraitor, with roughly $3B frozen after withdrawals were paused and the exchange pledged to cover losses from company funds. BNB and BTC rolled over sharply afterward, with higher-beta names underperforming.

Liquidations after the hack reached $1.5B, about 85% of them longs, because the dip on majors was bought mainly through leveraged perps, so spot never received the bid it needed and highly levered longs were flushed again. As we flagged on Friday, the initial selling came mainly from the majors while many alts held up firmly relative to other incidents, with flow suggesting US retail was buying spot dips, and Asia’s bid on BTC and ETH was sold quickly on the European open.

Pairwise correlations across the top 50, 100 and 250 tokens rose into the hack, then broke down once the compromised-asset list emerged and funds moved through DeFi, which added asset-specific fear to the market-wide pressure.

HYPE stood out as one that held up better and recovered after ICE, the NYSE’s parent, announced a definitive agreement with TradeXYZ to bring Hyperliquid-based HIP-3 perp futures onshore to US traders. Kraken’s earlier announcement lifted these names too, but this one is definitive, and we flag that the relative strength has to persist before it means more than a headline reaction.

Our take:

“Bitcoin has lost $80k level. And while not for the macro reasons we flagged, the market still feels heavy post the $1.5b liquidation on the back of Binance last week"

We have said $80k defines this market, and Bitcoin has traded below it, with the idiosyncratic nature of the Binance selloff leading us to work from $78k. Because the dip was bought through perps, we have no evidence of fresh capital behind any bounce, and liquidation events this size usually come late in a cycle, so history is a weak guide. The 50-week moving average, at ~$76.8k, is the next place Bitcoin needs to hold.

With the market feeling a little heavy, we would stop being short-term cautious if Bitcoin reclaims $80k and holds it with the bid coming from spot and ETF flow. A loss of the 50-week moving average would push us further the other way.