Market Struggles Post-Historic Liquidation Event on October 10
- On October 10, over $19 billion in leveraged crypto positions were liquidated, marking the largest wipeout in market history.
- MSCI proposed reclassifying Digital Asset Treasury companies (DATs) as fund-like vehicles, which could lead to their exclusion from major equity indexes if they hold over 50% of digital assets.
- JPMorgan estimates that excluding a flagship DAT from MSCI indexes could trigger forced passive outflows of around $2.8 billion, potentially rising to $8.8 billion with similar actions from other index providers.
- The consultation period for MSCI’s proposal is open until December 31, with a final decision expected on January 15, affecting the February index review.
The market’s inability to recover since the crash can be attributed to macroeconomic pressures and uncertainty surrounding DATs’ future role in traditional finance structures. With retail investors cautious after significant losses and ETF flows declining, the outlook remains bleak until clarity emerges regarding MSCI’s decision.
As of now, the market is under pressure due to potential forced selling of DAT stocks and concerns about a weakened structural bid for Bitcoin. The looming risk of up to $8.8 billion in passive outflows highlights the fragility of current market dynamics.
