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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:

• Afraid to check your portfolios? We recap the weekend’s selloff.

• Shifting regulatory attitudes could quicken the approval of SOL ETFs, says a 21Shares exec.

• A look at upcoming economic data may ease (or not) your market anxiety.

What’s the damage? It’s too early to tell 

I hope you got some rest over the weekend because if today was any indication of how the remainder of this week will go, you’re going to need it. 

But I’d be willing to bet that most of you spent a good part of the past two days checking prices. Don’t assess the damage just yet, though, because the worst is probably not behind us. 

The selloff in Japanese and South Korean stocks Monday triggered circuit breakers — mandatory breathers designed to curb panic-selling when there are major declines. The pause in trading didn’t do much good, though. 

South Korea’s Kospi and Kosdaq indexes were suspended for 20 minutes on Monday after each lost more than 8%. Even so, the Kospi closed nearly 9% lower while the Kosdaq ended the day more than 11% in the red. 

In Japan, the Topix index — which lost more than 12% — and government bond futures markets were halted Monday as well. 

In the US, things aren’t much better. Stocks are having their worst start to August — a historically bad month — since 2002. The so-called Magnificent 7 tech giants are all trading below their 50-day moving averages. As of 11 am ET, only 13 companies in the S&P 500 were not down. 

And to make matters worse, many investors (including yours truly) were unable to make trades or check their portfolios as Vanguard, Charles Schwab and Fidelity experienced outages. Maybe for the best. 

The risk-off sentiment permeated cryptos too, which extended their weekend declines Monday. Bitcoin sank to below $50,000 early Monday morning for the first time since February and was down 5.3% over 24 hours as of 2 pm ET. Ether, after hovering in the $3,000-range for the past month, slid to $2,119 early Monday.

It’s bad. Cue the demands for emergency rate cuts from the Fed. 

Wharton Professor Jeremy Siegel on CNBC this morning called for an emergency 75 basis point cut today plus another 75 bps in September, at “minimum.” 

As Noelle Acheson, author of “Crypto is Macro Now” said, there is one driving force behind these increasingly desperate calls: Make stocks go up again. The Fed, while generally careful to avoid surprising markets, has other priorities. 

Plus, given the impact of the yen carry trade on markets right now (more on that next), a Fed rate cut wouldn’t help much. It would actually likely make things worse. 

The TL;DR on what the yen has to do with all this: A lot of investors have been doing carry trades, where they borrow a currency at a very low or no interest rate (as of late this has been the Japanese yen) to buy currencies with higher interest rates (think New Zealand or Mexico). It’s all fun and games until Japan raises interest rates (which they did) and investors start to unwind their positions (which they are). The fact that asset managers have been aggressively employing this strategy in recent years and (potentially) opting out of hedging — which is very expensive with currency trading — only adds fuel to the fire. 

I won’t give any investment advice (if I had some I probably wouldn’t be a journalist), but I will advise you to keep an eye on the data. Check out what’s On Our Radar below to see what we’re watching for.

— Casey Wagner

These are the odds, according to researchers from Gemini, that Republicans have of winning the White House and the Senate come November. 

Betters on Polymarket tend to agree. As of Monday, the prediction market had a 29% chance of Republicans taking the White House and both chambers of Congress, compared to a 23% chance for Democrats. 

A Republican sweep will ease regulatory headwinds for the crypto industry, Gemini analysts wrote in their new Institutional Insights report, as “the US election has become a focal point for crypto.”

Crypto’s prominence within capital markets is growing day by day. 

The On The Margin Roundup crew will hit the stage at Permissionless III synthesizing crypto market conditions within the broader macroeconomic environment. 

The leader of 21Shares’ US business believes the shifting attitudes in Washington could help solana ETFs get the greenlight from regulators. 

Federico Brokate joined the company in June. Formerly the Americas business strategy director for BlackRock’s iShares, he helped the asset management giant launch its Bitcoin Trust in January.

21Shares debuted its own spot bitcoin ETF with Ark Invest at that time. It was then one of eight issuers to bring a spot ETH fund to the US market last month. 

US spot bitcoin ETFs have seen $17.5 billion of net inflows so far, while ETH fund flows collectively remain in the red (thanks to roughly $2.1 billion exiting the Grayscale Ethereum Trust). 

Brokate told Blockworks in an interview he forecasts that BTC ETF inflows could hit $30 billion by the end of the year. The new ether products could see roughly one-third of that total after 12 months on the market.     

A spot solana ETF would “sit really nicely” in a portfolio beside those BTC and ETH products, the executive said — adding that US ETFs holding multiple crypto assets are likely to follow. 

After VanEck filed for a SOL-focused product in late June, 21Shares quickly followed suit. In Europe, 21Shares offers a Solana Staking ETP with roughly $1 billion in assets. 

When the SEC could approve a solana ETF remains uncertain for now. 

Some have said the regulator might want to see a regulated SOL futures market — and a correlation between that and the spot market — before approving such a product.

“If that’s the path the SEC wants to chart, we’re happy to go down that road,” Brokate said. “But ultimately I think the attitude in Washington towards the category as a whole has really shifted in a favorable way. So we think there could be some sort of acceleration to the approval of a spot solana product.”

Speaking of Washington, you’ve probably heard there’s a presidential election just three months away.

Former President Donald Trump said at Bitcoin 2024 he would fire SEC Chair Gary Gensler. He also promised to “keep 100% of all bitcoin the US government currently holds or acquires.” 

Kamala Harris — set to be the Democratic nominee to challenge him in November — hasn’t yet shared a specific stance on crypto, though that could soon change.

“I think what you have is an ecosystem that is going to be supported by both political parties in the US,” Brokate said. “So when I think about the election…I’m bullish regardless of the outcome.”

Check out Blockworks’ full Q&A with Brokate here.

— Ben Strack

Happy Monday! If you’ve ever had doubts that data moves markets, let last week be evidence of the contrary. We don’t have any major economic reports this week, but the data we do get will be telling nonetheless as it won’t take much to either increase or ease market anxiety. 

Here’s what we’re watching: 

• On Tuesday we will get June’s US trade deficit figure, which measures the difference between import and export value. In May, the deficit widened to -$75.1 billion, signaling that a decline in exports is weighing on economic growth. Still, the deficit expanded less than expected in May. Analysts are calling for June’s deficit to come in at -$72.5 billion. 

• Weekly jobless claims on Thursday will be telling after last week’s disappointing July labor report. Last week, first-time filers rose to a nearly one-year high of 249,000. Analysts are calling for this figure to ease to 240,000 on Thursday, which would be a welcome sign that the labor market is not softening too much. 

— Casey Wagner

• Jump Crypto has transferred almost $136 million in ETH over the past four days, sparking concerns that the market maker could be influencing recent downward price action. Blockworks’ David Canellis has other thoughts, though.

• Crypto stocks, predictably, have not escaped the recent downturn unphased. Coinbase lost 20% at the open and was trading 6% lower as of 2 pm ET. MicroStrategy and Marathon Digital were similarly in the red, down 8% and 3%, respectively, two hours before the close.

• Markets now say there is a 77% chance of a September rate cut, up from just 11% a week ago, according to data from CME Group.