Crypto markets have shown relative resilience even as macro pressure intensified, according to a market report published by Wintermute on Aug. 4. The firm said that while the Federal Reserve kept rates unchanged and U.S. equities absorbed the fallout from the liquidation of a multibillion-dollar AI fund, digital assets held up better than many expected. In Wintermute’s view, the current “pain trade” is to the upside, with incremental selling pressure in crypto close to exhaustion.
The update, written by Wintermute’s OTC traders, examined the Fed decision, the forced unwinding of an AI-focused fund, and the state of positioning and liquidity across crypto markets under a difficult macro setup.
Fed split keeps pressure on rates markets
Wintermute said the Federal Reserve voted 9-3 to keep its policy rate in a 3.50% to 3.75% range. Three dissenting members pushed for a 25 basis point increase. The report said that internal division, together with intentionally vague forward guidance, led bond markets to reprice risk.
The 30-year U.S. Treasury yield briefly climbed to 5.24%, its highest level since July 2007. Wintermute said the move showed that investors still question the Fed’s credibility on inflation.
AI fund liquidation helped U.S. equities release pressure
Even with yields moving higher, the S&P 500 and Nasdaq still posted modest gains for the week. Wintermute said a large forced liquidation was a key reason the equity market managed to stay afloat.
The report identified the fund as Situational Awareness, a highly leveraged AI fund founded by former OpenAI researcher Leopold Aschenbrenner. Its size dropped from $45 billion to about $10 billion. After facing margin calls, the fund was forced to sell public market positions to Citadel at discounted prices. Wintermute described that liquidation as a clearing event that relieved earlier overheating in semiconductor and AI-related stocks.
Crypto absorbed ETF outflows and BTC sales with limited losses
Wintermute contrasted that with crypto market performance over the same period. The report noted that U.S. spot Bitcoin ETFs recorded $265 million in outflows on the last trading day of July. It also said Strategy, formerly MicroStrategy, sold BTC for the third time since December 2022 in order to pay preferred stock dividends.
Even with those headwinds, major crypto assets were down less than 4% for the week. Wintermute argued that the market’s ability to hold up through a sequence that included three Fed officials calling for a rate hike, a 19-year high in the 30-year Treasury yield, and the collapse of a $45 billion neighboring fund strongly suggests that incremental crypto selling is nearly exhausted.
The firm added that it may still be too early to call for a powerful rebound. At the same time, it warned that if the market suddenly moves higher, sidelined investors could be caught off guard.
Capital rotates into majors as long-tail altcoins keep washing out
The report also highlighted capital rotation within crypto. Wintermute said a firmware vulnerability in Coldcard hardware wallets led to the theft of about $70 million in BTC. It also cited Storj filing for bankruptcy protection and the shutdown of several projects including Movement Labs.
Against that backdrop, capital is leaving long-tail altcoins and concentrating in major tokens and regulated ETF products tied to them. Wintermute’s OTC data showed that institutions accounted for a record 72% of spot trading activity, a sign that the market is being driven more by institutional flows and derivatives yield strategies, while retail participation remains relatively subdued.