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Markets came under pressure on Monday as cryptocurrencies were sold off even as the odds of an interest rate cut remained high. Bitcoin traded lower throughout the session, at one point falling more than 6% during the day, before ending down about 4.5%. The Nasdaq 100 (-0.2%) and S&P 500 (-0.3%) fell only modestly, while gold (+0.1%) once again outpaced Bitcoin and held near its recent highs.
It appears that markets are still very focused on interest rate developments in the US. The CME FedWatch tool now assigns an 87% probability of a 25 basis point cut in December, and we see the recent move in SOFR, once again materially above the Fed’s upper bound, as a clear signal of emerging liquidity and bank reserve pressures. When the key overnight guaranteed rate continues to price across the top of the policy corridor, it indicates that reserves are becoming scarce at the margin and balance sheet capacity is constrained. All eyes are now on the Fed’s next move, as an adjustment to its balance sheet operations or managed interest rate toolkit will be needed to ease this tension and stabilize money market rates back within the target range.
Back on the crypto side, performance was broadly weaker with most sector indices underperforming Bitcoin after a tough month for risk assets. The best performing group was crypto miners (+2.3%), which continued to decouple from the rest of the pool, while crypto stocks (+0.1%) were marginally positive. On the other end of the spectrum, Modular stock was down 11.3%, gaming stocks were down 9.1%, and the AI basket was down 8.1%. Meanwhile, the L2, DEX and DePIN indices also fell by 6% to 8% on the day. We see this pattern as consistent with continued risk reduction across riskier currencies, as markets await clearer confirmation that the Fed will act to ease current fears of liquidity pressures.
Market update
Strategy (MSTR) was in the lead yesterday as the stock extended its decline. Shares traded below $160 on Monday before closing near $171, sending the MSTR down nearly 37% over the past month and more than 60% from its July 2025 highs.
We see the outstanding mNAV ratio falling below 1 in early November and now sliding towards 0.75 as a clear reflection of the current risk off environment. This dynamic also raises concerns about potential ripple effects, since these vehicles can amplify withdrawals and forced selling if stocks trade at a sustained discount to the underlying assets.
Once an instrument like a strategy trades at a sustained discount to net asset value, the issuance of new shares stops accumulating and becomes value-destroying, effectively removing one of the key financing instruments. This pushes the company towards other levers – selling Bitcoin or selling derivatives on Bitcoin – at a time when both the token and the stock are already under pressure, and markets are starting to price this possibility in advance.
However, the company’s announcement disclosures yesterday highlight that the strategy has built up a cash reserve of approximately $1.4 billion which was funded through a recent share issue. This is explicitly set aside to cover at least 12 months of dividends, with a stated goal of extending this to 24 months so that you can continue to pay dividends without touching the roughly 650,000 BTC even in the event of an extended withdrawal. The announcement helped the stock recoup some of its losses yesterday by reassuring investors that it can meet its dividend obligations without selling Bitcoin.
source: strategy
Management lowered its year-end bitcoin price assumptions from $150,000 to a range of $85,000 to $110,000, lowering its dollar bitcoin profit target to about $8.4 billion-$12.8 billion, and making full-year GAAP earnings highly sensitive to eventual bitcoin printing. On the investor call, they highlighted that a year-end Bitcoin price below approximately $94k would mean operating at net losses, while a price above $94k would support positive income.
source: strategy
Leveraged ETFs built around the strategy’s trading are bearing the brunt of the move, with MSTX and MSTU, which target the strategy’s 2x daily return, among the 10 worst-performing US ETFs this year after losses of more than 80%. The most recent MSTP has fallen by a similar amount since its launch, and the value of the trio has shrunk from more than $2.3 billion in early October to about $0.8 billion today. Together, these products show how a 60% pullback in a stock and a 30% pullback in BTC can be amplified by volatility decay, where compounding gains and losses can diminish returns even if the stock finishes flat. This resulted in late retail buyers incurring huge losses, turning the once popular leveraged MSTR trade into a typical case of negative reversals.
HumidiFi ICO: Dark AMM, Darker Disclosures
HumidiFi’s WET token will go on sale tomorrow, December 3rd. WET will be the first initial coin offering (ICO) in Jupiter’s decentralized token configuration (dtf), with trading available on Meteora and HumidiFi at TGE on Friday, December 5. For context, HumidiFi is a supporting AMM developed by Temporal, an original R&D company in Solana. Aside from HumidiFi, Temporal also runs Nozomi, a transaction access service on Solana, and Harmonic, a block building system aimed at competing with Jito. Before the ICO, the team published a report condition With WET token economies.
WET will have a maximum supply of 1 billion tokens, with 10% allocated to ICO participants. Eligible ICO participants are divided into three categories:
- Rutba List (6%)reserved for whitelisted wallets, including “HumidiFi users, active and meaningful HumidiFi contributors, and HumidiFi’s Discord community“.
- JUP strikers (2%).
- General sale (2%)which will be conducted on a first-come, first-served basis.
In the announcement, HumidiFi indicated that a snapshot was taken on November 11 to determine the pre-sale allocation allocated to HumidiFi users (i.e. large traders). The chart below shows that traders with a lifetime trading volume of over $100M have historically accounted for more than 50% of HumidFi’s daily trading volumes. These portfolios are likely from market makers and arbitrage bots, and will likely be whitelisted for sale.
The table below shows the WET token distribution and unlock schedule. As mentioned previously, 10% will be allocated to ICO participants, with the remaining 90% distributed between the Zero Position Foundation (40%), the ecosystem (25%), and the labs (25%).
The organization is supposedly run by Temporal, although the announcement never attributes the operation of Zero Position to any specific entity, leaving this information undisclosed a day before the ICO. The Labs allocation in the token distribution table likely refers to Temporal as well, given its role as a primary engineering contributor to HumidiFi. The announcement also notes that HumidiFi has tapped into a broader ecosystem of partners, including engineering teams, market makers and liquidity providers, suggesting that the ecosystem bucket will likely be used to incentivize and reward these contributors.
WET will launch with a float of 23%, which is somewhat reminiscent of the low-float, high-FDV token launches that have historically plagued Solana DeFi (e.g., JTO, KMNO, JUP). It is surprising, to say the least, that the interim team decided to launch with a low float, given how the market has punished these tokens over the past two years. As shown below, 19.25% of the total supply (192.5 million tokens) will be unlocked every six months over the course of TGE’s two years.
In terms of fundamentals, HumidiFi has been consolidated as the top AMM in terms of trading volume over the past few months. It accounted for 51% of on-chain SOL stablecoin volumes in November, and 36% of total Solana DEX volumes, surpassing all other DEX platforms, including “traditional AMMs” such as Orca, Raydium, and Meteora.
Not only does HumidiFi dominate the market share of Solana DEX volumes, it also outperforms most CEXs in spot SOL-USD volumes. The chart below shows that HumidFi is averaging over $1 billion in daily SOL-USD volumes, recently surpassing Binance as the top spot. HumidiFi’s rapid rise to the top since its launch in June shows the incredible progress the core team has made in designing the supporting AMM.
Until now, there has been no clean way to gain direct exposure to supporting AMMs. The only way to express the view that AMM supports will increasingly dominate liquid pair volumes on Solana is to shorten traditional AMM symbols such as RAY and ORCA. Unfortunately, it looks like WET won’t deliver the vehicle investors have been waiting for.
In terms of token interest, users will be able to stake WET to receive discounts on fees, with the team explicitly stating that “WET is not and should not be considered an investment.” One day before the token sale, many questions remain unanswered. Why would a profitable back office raise money via ICO? Does the token represent any ownership rights on the AMM prop? Who will govern the institution to which 40% of the offer is allocated? Only time will answer these questions, and only time will tell whether WET will bring any value or simply serve as the latest free ad for MetaDAO.
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