Spencer Li (Synapse Trading)

Thankfully we dodged the bullet. 🙏🏻

🏦 6. Alt-Lending & DeFi stablecoin protocols Hit: Smaller money markets and algo-stable projects suffered heavy outflows. Why: Collateral values (mostly BTC/ETH/SOL) fell sharply → liquidation cascades. Protocols like Aave, Compound, MarginFi, Solend saw 20–40% loan book shrinkage. Algorithmic stablecoins lost pegs briefly (e.g., USDe to 0.96, USDY to 0.93) before recovering. 🧭 Effect: Risk appetite in DeFi credit is frozen short-term; stablecoin yields will fall sharply as borrowing dries up. 🧊 7. NFTs & Game tokens Hit: Floor prices dropped 20–40%, volumes collapsed 70% overnight. Why: NFTs are pure risk assets with zero liquidity depth. ETH volatility drains capital from NFT markets first. 🧭 Effect: Blue-chip NFTs (BAYC, Azuki) hit new multi-year lows; GameFi tokens retraced to 2023 levels. 💬 8. Who held up best BTC spot ETFs: Minor redemptions; inflows slowed but no panic selling — this was leverage unwinding, not ETF exits. ETH spot ETFs: Slightly negative flows but resilient. Stablecoins: USDT/USDC held their pegs; redemptions modest.

The recent crypto crash wasn’t evenly distributed — some products, sectors, and instruments were absolutely crushed, while others (like BTC spot ETFs) held up remarkably well. Below is a full breakdown of what got hit hardest, why it happened, and what it reveals about crypto’s current structure. 🧨 1. Altcoins and DeFi tokens — the biggest casualties Hit: –25% to –50% in 24–48 hours Examples: SOL, AVAX, LINK, APT, SUI, MATIC, ARB, OP, AAVE, UNI, GMX Why they collapsed: Leverage stacking: Many altcoins had high perpetual futures open interest (OI) to market cap ratios. When BTC fell 8–10%, cascading liquidations forced mass selling in smaller-cap tokens. Funding-rate imbalance: Perpetual swaps funding rates on SOL, AVAX, LINK, and others were heavily positive (+0.05–0.12%/8h) pre-crash — meaning everyone was long. When the wipeout started, the funding reset wiped out overlevered longs first. Liquidity desert: Market depth in alts has thinned dramatically since mid-2024. Most pairs trade on offshore venues (Binance, OKX) with only a few market makers. Once panic starts, slippage explodes, amplifying price moves. Narrative fatigue: The AI + L2 + “SOL ecosystem revival” hype was crowded. These stories unwind fastest when macro turns risk-off. 🧭 Effect: Many DeFi blue chips are now back to late-2023 levels. Expect slower recovery—liquidity and trust take months to rebuild once leverage dies. 💀 2. Perpetual Futures & High-Leverage Derivatives Hit: Record liquidations of US$19–22 billion, mainly on Binance, OKX, Bybit. Why: Perps are the first domino. When BTC lost its $118k support, cascading margin calls liquidated cross-margin positions tied to altcoins. Many traders used BTC or USDT as collateral, so the BTC drawdown triggered cross-asset liquidations. Market-making algos pulled liquidity, creating “air pockets” — multiple exchanges saw >10% wicks below spot indices. 🧭 Effect: Funding rates went from +0.08% to negative (–0.02%) within hours. Perp OI wiped ~30–40% overnight — effectively flushing out months of built-up leverage. 🏦 3. CeFi yield products & structured notes Hit: Some funds and platforms offering delta-one or leveraged yield notes (BTC auto-callables, basis trades, and options vaults) suffered drawdowns or margin calls. Why: When BTC dropped 10% quickly, options knock-in barriers were triggered on structured notes. Platforms promising “stable 10–20% APY” using options vaults suddenly had to sell collateral into a falling market. Market-neutral funds running basis trades (long spot / short futures) were fine if they were hedged, but those running partial hedge or leverage 3–5× faced liquidations when funding flipped negative. 🧭 Effect: Most CeFi platforms paused redemptions briefly or repriced yields lower. It’s not a 2022-style contagion (no big lender defaults yet), but expect smaller funds and desks to quietly close. 🪙 4. High-beta Layer-1 ecosystems (especially Solana) Hit: SOL –30%, ecosystem tokens (JUP, BONK, PYTH, RAY, JTO) –40–60% Why: Solana had been the “crowded long” of 2025. A massive airdrop season + ETF optimism had created leverage piles across its DEXs and CeFi venues. SOL perps had extreme funding; whales used it as beta exposure to BTC. Once BTC slipped, SOL’s high open interest (~US$2.5B) unwound brutally. 🧭 Effect: On-chain TVL dropped ~20%; some DeFi projects temporarily paused emissions to stabilize token supply. Expect multi-week rebuilding before trust returns. 🔒 5. Smaller exchanges, perpetual DEXs, and on-chain leverage Hit: dYdX, GMX, Hyperliquid, Aevo saw double-digit volume slumps and user liquidations. Why: Many users took leverage directly on-chain with small margin buffers. Gas spikes + oracle delays = delayed liquidations → overshoot to the downside. The Hyperliquid wallet hack (~US$21M) added another confidence hit during peak volatility. 🧭 Effect: TVL drawdowns across leverage DEXs: –25–35% overnight. Users rotate back to major CEXs for a while; on-chain perps volumes will recover last.

Some of the recently closed trades and the P&L: https://synapsetrading.com/trade-log-results/

Ethereum (ETHUSD) - Also managed to buy near the lows and exited near the highs, capturing a 12.76% gain before prices crashed 25% in the next few days.

Bitcoin (BTCUSD) - Trading between the range, and capturing a 10% profit in 9 days. Soon after we exited the prices plunged back to the bottom. Timing is important.

Semiconductor ETF (SMH) - Entered at the breakout, and exited just before the huge selldown, giving a profit of 14.29% on the trade log. #break

Taiwan Semicon (TSM) - Entered on the breakout, and managed to exit near the highs, giving a 16.85% gain on the trade log. #swing

Recently with the market volatility, we have closed quite a few trades, so let's take some time to review some of the trades.

Monthly Market Wrap (September 2025) September 2025 was one of the strongest months for global markets in years, with the S&P 500, Nasdaq, and Dow all reaching fresh highs, gold hitting record prices, and Bitcoin surging past $110,000. The main drivers were the U.S. Federal Reserve’s first rate cut of the year, inflation stabilizing near 3%, and hopes of a soft landing as the labor market cools without collapsing. Political risks such as the U.S. government shutdown and trade frictions with China added uncertainty, but markets largely focused on supportive monetary policy and broadening corporate strength, particularly in tech. Commodities diverged, with oil slumping on supply concerns while gold and silver soared as safe-haven hedges. Read full blog post: https://synapsetrading.com/?p=49795

Why do these shutdowns happen? The United States has government shutdowns because of the way its budget process is structured. Congress must pass annual spending bills (appropriations) to fund the operations of federal agencies. If lawmakers cannot agree on these bills, or at least a temporary extension known as a continuing resolution, the government legally loses its authority to spend money. When that happens, non-essential federal agencies and services are required to halt operations until new funding is approved. Essential functions like national security, law enforcement, and certain safety services continue, but many employees are furloughed or must work without pay until funding resumes. Shutdowns became a recurring risk after the 1974 Congressional Budget Act, which reshaped the budget process. They reflect both the legal requirement against spending without authorization (the Antideficiency Act) and the deep political divisions that can stall budget negotiations. So, the root cause is not that the U.S. government “runs out of money,” but that political deadlock prevents Congress and the President from authorizing its use. This is why shutdowns often occur during periods of partisan gridlock, when one side uses the threat of a shutdown as leverage in larger policy battles.

What to watch closely Court rulings on the legality of layoffs or reduction in force directives. Congressional maneuvering on whether a temporary continuing resolution is passed. Public pressure and local economic strain as furloughed workers go unpaid. Federal agency compliance or defiance in starting layoffs or holding off pending legal clarity. Market shock triggers such as moves in Treasury yields, bond spreads, or consumer confidence. Outlook and scenarios The most likely outcome is a short to mid shutdown of one to three weeks, assuming political pressure and public cost force compromise. Some permanent cuts may be delayed or blocked by courts. A partial reopening may occur first, with essential departments funded while others drag. Markets will likely remain bumpy and cautious. Investors may rotate toward safer assets and cut risk in rate-sensitive sectors such as real estate and homebuilding, while holding more resilient growth and technology stocks until more clarity emerges. The risk remains that this could turn into a more protracted standoff, particularly if political demands harden or the courts allow aggressive agency actions to stand. Historically, however, the U.S. has always found a way to reopen within weeks, as the cost of prolonged shutdowns becomes politically and economically untenable.

What’s happening now As of October 1, 2025, the U.S. federal government has officially entered a shutdown because Congress failed to pass a funding bill on time. Unlike some partial past shutdowns, this one is being cast by the White House as a full government pause with non-essential operations suspended, while essential services such as defense, law enforcement, and Social Security continue, though their staff may go unpaid until funding is restored. The Congressional Budget Office estimates up to 750,000 federal workers could be furloughed daily, with about 400 million dollars in lost compensation per day. In a more aggressive twist compared to prior shutdowns, the Office of Management and Budget has instructed agencies to prepare for reductions in force, meaning permanent layoffs or cuts in programs that do not align with the White House’s priorities. Labor unions have already filed lawsuits alleging that the administration’s instructions violate law. The unions argue that ordering agencies to start planning or executing mass firings or requiring employees to work on those plans breaches the Antideficiency Act, which generally bars spending in absence of appropriation and protects against unauthorized expenditure. A federal judge has already blocked the planned layoffs of over 500 employees at Voice of America, citing concerns over whether the agency was complying with prior court orders and whether the administration is acting lawfully in this context. The political rhetoric is heated. HUD, a federal agency, has posted messaging on its website blaming Democrats for the shutdown, indicating the administration is shifting blame publicly. Risk assessment: real and heightened this time The risk is higher than in many past shutdowns for several reasons: Permanent layoffs rather than mere furloughs. The administration is pushing a more aggressive posture, not just pausing until funding resumes but trimming staff permanently in non-priority agencies. Legal pushback is running immediately. Unions are suing and courts are already halting some layoffs such as those at Voice of America, meaning implementation of drastic cuts may be blocked or delayed by judicial intervention. High scale and financial stress. With 750,000 potential furloughs per day and hundreds of millions in lost pay, local economies, consumption, and service delivery will feel strain quickly. More extreme political environment. The rhetoric is existential in tone, and the administration is trying to reallocate spending authority, challenge standard congressional control, and reframe agency operations. So while shutdowns are not new, the severity and structure of this one make it riskier for bigger disruptions, longer duration, and greater uncertainty. Historical precedents and timeline of resolution Past shutdowns provide useful context: 1995 to 1996: lasted about 21 days. Caused by budget disputes between President Clinton and Congress. Many agencies closed and public services were delayed until a compromise was reached. 2013: lasted about 16 days. The fight centered on funding Obamacare. Many federal employees were furloughed, national parks and services suspended, and back pay was eventually granted. 2018 to 2019: lasted 35 days, the longest shutdown in U.S. history. Hundreds of thousands of workers were furloughed or worked without pay, and many experienced financial stress until a temporary funding measure was passed. Typically, shutdowns last from days to a few weeks. Rarely do they stretch beyond a month unless the political impasse is especially deep. However, those shutdowns were largely furlough-based, not shutdowns with declared permanent cuts built in.

Some recently closed positions, only 2 small loses and 7 winning trades! 🔥🔥🔥 https://synapsetrading.com/trade-log-results/

What’s expected at the FOMC - Base case: A 25 bp cut (“recalibration”) with the Fed pivoting toward supporting a softer labor market while keeping an eye on sticky inflation. AP and WSJ both flag a quarter-point move as the consensus, and markets are positioned for it. - Street color: Some desks look for three cuts in 2025 (Sep/Oct/Dec) with slower easing in 2026, while others think the median dot plot could show only two more cuts this year. Watch the SEP for how far officials are willing to go. - Outliers: Standard Chartered floated a 50 bp risk after weak jobs data, while Morgan Stanley and Deutsche Bank pushed back—seeing 25 bp now with scope for follow-up cuts. Bank of America expects two cuts this year (Sep, Dec). Projections (SEP / “dot plot”) to look for - 2025 rate path: Consensus leans to 2–3 total cuts in 2025; futures skew to three this year and two by mid-2026. The risk is the dots only validate two this year. - Macro updates: Expect acknowledgment of slowing hiring (big downward payroll revisions) vs. inflation ~2.9% YoY in Aug, which argues for caution. Balance of risks likely shifts further toward employment. Bull vs. Bear case (for markets & policy path) - Bull case (risk assets up): The Fed cuts 25 bp and the dots/press conference signal more to come (e.g., three in ’25), framing moves as normalization, not crisis. That supports cyclicals/small caps and eases financial conditions. Reuters notes this could broaden the equity rally if a recession is avoided. - Bear case (hawkish cut / risk-off): The Fed cuts but pushes back on market pricing—**dots show only two** additional 2025 cuts, Powell stresses sticky prices (tariffs) and uncertainty, and dissents emerge. That could lift yields, flatten the curve, and hit duration-sensitive names. Several previews warn about this communication risk around the dots. One-liner from banks/analysts - BofA: Two cuts in 2025 (Sep & Dec) on labor-market cooling. - Standard Chartered: 50 bp is possible after soft jobs (minority call). - MNI (preview): 25 bp cut to a 4.00–4.25% range; Powell’s Jackson Hole remarks set up a “reluctant return to easing.” - Reuters house view (preview roundup): Street skews to three cuts this year; watch the median dots and any new dissents.

Quick updates on our trade log this week, currently we have 12 open trades, and an annualised return of 91.57% for the year, based on using 10% of your capital for each trade. https://synapsetrading.com/trade-log-results/

The S&P 500 logged an objective breakout above a months-long ceiling, with buyers overwhelming sellers. Leadership is rotating across mega-caps (Netflix to Nvidia/Microsoft to Google, with Amazon poised to follow), while breadth is improving as small caps and small-cap growth break out from multi-year bases, suggesting room to run. Macro conditions are unusually supportive for a melt-up: the Fed is cutting rates into a still-resilient economy, with real-time GDP tracking near 3 percent, echoing non-recessionary easing cycles in the mid-80s and mid-90s that powered strong equity advances. Key risks remain. Labor data are softening at the margin, and an oil price spike would be a classic recession catalyst; by comparison, tariffs are estimated to be a smaller drag. Cross-asset signals are constructive, with gold consolidating near highs and crypto attempting a major base breakout that tends to correlate with small-cap strength.

Weekly Market Report 1) Main market themes US growth is cooling while the inflation test looms. August nonfarm payrolls rose by 22,000 with unemployment up to 4.3 percent and average hourly earnings up 0.3 percent month on month. That combination pushed rate-cut odds higher ahead of next week’s CPI and PPI prints. Policy risks are back in the driver’s seat. The administration asked the Supreme Court to reinstate broad import tariffs after an appeals court said most were illegal. This keeps a binary overhang on retailers, autos and semis and is showing up in guidance cuts at import-heavy names. AI spending remains the clearest earnings tailwind. Broadcom beat and raised on AI custom silicon with AI revenue up 63 percent to 5.2 billion dollars and a new 10 billion dollar customer. Watch how this cascades into next week’s Oracle and Adobe prints. 2) Past Week Jobs United States August payrolls +22,000. Unemployment 4.3 percent. Average hourly earnings +0.3 percent month on month and +3.7 percent year on year. Prior months revised down a net 21,000. Stocks reacting to data Indices faded into the close Friday as weak jobs fanned slowdown worries. Banks led declines while AI leaders held up on Broadcom’s outlook. AI semis Broadcom guided Q4 revenue to 17.4 billion dollars and flagged AI revenue accelerating to 6.2 billion dollars in Q4. Shares jumped on news of a 10 billion dollar AI chip order. Retail Lululemon cut full-year sales and profit outlook and quantified about 240 million dollars gross profit hit in 2025 from higher tariffs and loss of de minimis. Stock fell sharply. Security software Zscaler beat and guided above views for FY26. E-sign DocuSign beat on revenue and EPS and raised outlook. Energy OPEC plus signaled it will consider another output hike on Sunday. Brent slid toward mid 60s on weak demand signals and build in US crude stocks. Halliburton began layoffs citing softer activity. Trade policy Administration petitioned the Supreme Court to restore tariffs that an appeals court partly struck down. Markets treated it as a live tail risk for importers and tariff-sensitive supply chains. High-profile governance Tesla board unveiled a proposed 10-year compensation plan for Elon Musk that could be worth up to 1 trillion dollars if aggressive targets are met. Insiders and funds Notable Form 4s this week included proposed or executed sales by Joseph Gebbia at Airbnb, Jayshree Ullal at Arista Networks, Satya Nadella at Microsoft, and Richard Schulze at Best Buy. Nvidia CEO Jensen Huang continued scheduled sales under a 10b5-1 plan. 3. Upcoming Week: United States inflation PPI for August on Wed Sep 10 at 08:30 ET. CPI for August on Thu Sep 11 at 08:30 ET. These are the last major inflation prints before the Sep 16–17 FOMC. Europe ECB monetary policy meeting Wed–Thu Sep 10–11 with decision at 14:15 CET and press conference at 14:45 CET on Thu. Baseline market view is hold with focus on guidance. United Kingdom Monthly GDP for July due Fri Sep 12 at 07:00 BST. China prices August CPI and PPI due mid-week. Consensus looks for PPI to remain in deflation territory. Energy OPEC plus meets Sunday Sep 7 with quotas and pace of unwinding cuts in focus. Price action into and after the meeting will set the tone for energy equities. Earnings to watch Oracle and Adobe headline US large caps late week. Kroger and GameStop are also slated. Look for AI workload commentary at Oracle and pricing elasticity and AI tools at Adobe. Tech product cycle Apple’s September event is set for Tue Sep 9 at 10:00 PT. New iPhones and wearables can move suppliers and carriers.

Monthly Market Wrap (August 2025) August was a strong month for markets, with U.S. stocks extending their winning streak. The S&P 500 and Nasdaq hit new record highs, and the rally broadened beyond big tech as small cap and economically sensitive stocks surged. Corporate earnings were generally better than expected, and while a few companies stumbled, overall results supported the view that the U.S. economy is holding up. On the macro front, inflation eased further and the Federal Reserve signaled it may cut interest rates soon. This prospect gave stocks and bonds a boost. Treasury yields fell and the dollar weakened, which in turn lifted commodities. Oil prices ended higher and gold remained near highs as an inflation hedge. Read full blog post: https://synapsetrading.com/?p=49746