As you likely heard, hedge fund Archegos could not maintain margin requirements. The result is their creditors, primarily Credit Suisse and Nomura are expected to lose billions. The market is still in an epic bull run and stocks are near an all-time high, so what could have possibly forced the banks to do a margin call?
I suspect the pending expiration of the SLR rule forced banks to return to expected margin requirements for their loans. This would have forced the banks to request Archegos to become stricter with margin requirements. The question I have for you is, how many highly leveraged positions if unwound would cut stocks by 50% like Archegos did? Are there any other positions out there that will have new margin requirements by its lenders after this event or with the SLR rule expiring on the 31st?
This is NOT a moment like 2008 failure of Lehman Brothers, but sometimes history repeats in a similar manner. To learn more about The Macro market considerations, click here.
I view this event as exposed to what I have been concerned over since January 25th. Even if we have no market downside, I have a hard time understanding the catalyst for a material upside in this environment. There is likely now more than ever upside in Bitcoin as younger people will exit market games and go to the 'safe bet'. This of course won't be safe, but it may provide a counter play to the markets for a bit before that also hits a maximum. Buying Bitcoin right now is a calculated risk that may pay off very well.
To hear more about why Archegos failure is potentially a systemic risk, watch this video, he does a great job to explain.
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