Monday Market Brief: AI funding stress clears the longs again as Fed week begins

Bitcoin ended the week down 2.4%, close to $80,000, after trading below that level on Saturday and again this morning. The weekend low was $79,107 and Monday's dip went just under $79,300, both below the $79,700 low of 15 October. Altcoins, which cover all crypto except Bitcoin and stablecoins, fell 2.18%. Bitcoin still closed the week above the 50-week average near $77,000, a sixth straight weekly close. Bloomberg tied Monday's move to AI spending worries, ETF outflows and caution ahead of the Fed meeting.

For asset managers, portfolio managers and digital asset desks positioned around this level, this was not the first break of $80,000 this year. Bitcoin went through it on 31 January on the way to about $60,000 in early February, and again in the early-June sell-off that took it below $60,000. It had recovered to above $86,500 by 2 October, which makes the past two weeks a retreat from that rally.

Leverage did the damage again. More than $1 billion of positions, mostly longs, were liquidated between Thursday and Saturday, the second $1 billion flush in under two weeks after the $1.055 billion cleared on 14 and 15 October. Saturday alone brought about $436 million of liquidations in the four hours to 1 p.m. ET, $404 million of them longs, according to CoinGlass. The nearer downside cluster we flagged last week, about $500 million of longs near $80,000, was the target.

Flows were calmer. US spot ETFs took in a net $67 million across crypto. Bitcoin funds gained $301 million on the week, after more than $1 billion of inflows early on and about $770 million of outflows on Thursday and Friday, while Ether funds lost $221 million and Solana funds $18 million. Ether products have now had four straight weeks of redemptions.

Liquidity is still too thin to absorb forced selling. Bitcoin spot volume is below $20 billion a day, well under the $30 billion we have used as the threshold for a genuine expansion phase, and futures volume is many times spot volume. Funding rates are still positive on most Bitcoin venues, so longs are still paying to hold and the leverage has not fully cleared.

Why it matters: the AI trade now has a credit problem

Equities and Treasuries moved in opposite directions. The Nasdaq-100 (US Tech 100 Cash) fell 1.49% last week after a 4.98% drop the week before, per TradingView, a combined loss of about 6.4%. Thursday was the sharpest day, with Meta's results hitting tech and the S&P 500 posting its worst day since July. Money went into Treasuries. The 10-year yield fell about 19 basis points on Thursday to 4.96%, its biggest one-day drop since March 2023, and ended the week at 5.00%, lower for a second week in a row.

The trigger was the AI funding question we raised last week. Meta's results on Wednesday answered it badly: shares fell about 7% on Thursday after it raised the low end of its 2026 capital spending range to $135 billion to $145 billion. Hyperscaler capex is heading toward $800 billion this year. Credit default swaps on Meta and Nvidia hit record highs, near 108 and 101 basis points, and Oracle's are higher still. Investors are buying protection on the debt that pays for the build-out.

Chips stayed under pressure. Korea's Kospi is roughly 40% below its June peak, and the selling has now reached the wider Nasdaq-100. Gold also fell, losing more than 4% to about $3,990, its worst week since early June, even as yields dropped. Analysts blame stop-loss selling, crowded positioning and a firm dollar. When the safe haven is sold together with equities, investors are raising cash.

Oil and the Fed keep rates in play. Crude oil rose 4.29% on the week and WTI 3.88%, per TradingView, with Brent settling at $116.72 on Friday, its highest close since late April. The main driver is the Middle East, with Houthi attacks on Saudi Arabia and Iran-linked incidents near Hormuz. Ukrainian strikes on Russian refineries and export infrastructure add to it, mostly through diesel. Futures put the odds of a hike this week near 5%, down from 14.9% last week, but a December hike is still near 80%. September payrolls rose only 29,000 and unemployment reached 4.2%, so the Fed is hiking into a weakening labor market.

Bitcoin is catching up with equities. Over two weeks it has lost about 4.5% against 6.4% for the Nasdaq-100, but it fell more than the index this week, 2.4% against 1.49%, after falling less the week before. The link is partial, but the gap between the two has closed.

The Big Whale's take

Last week's structure held. We wrote that price was moving toward the largest leverage pools, with $80,000 the nearer downside target, and the longs cleared there between Thursday and Saturday. The map is more balanced now. Within $3,000 of the current price, about $1 billion of shorts sit above and about $850 million of longs below.

Shorts now hold the larger pool, the reverse of last week, so the upside has more fuel, but neither side is small. With thin spot volume and positive funding, a sweep in either direction is possible around the Fed decision. A hawkish message on December would put the longs at risk first. A softer tone would point price at the shorts, which would be forced to buy back.

Equities remain the key variable, and rates can come back through the Fed. A hold with firm language on December could push the 10-year back above 5% and add to the pressure on long-duration assets. We think the narrative is shifting from AI growth to the cost of money. Three developments could break the market wider: unemployment rising along with inflation, a miss from a large chip company, or stress in hyperscaler credit. Any of them could push the Nasdaq-100 into a correction of more than 20% from its record. That is our hunch.

Catalysts are close. The Fed decides on 28 October, the same day Alphabet and Microsoft report, and Amazon and core PCE inflation follow on 29 October. Their capex plans and cloud numbers will show whether the AI spending that hit Meta's shares can be financed. Intel and Sandisk report this week, AMD around 3 November and Nvidia on 17 November. Until then we expect Bitcoin to trade between the two liquidity pools. A daily close below $80,000 would open the way to the 50-week average near $77,000, and a close above $86,000 with renewed ETF inflows would be the first sign of real demand.