Jobs ⬇️, Crypto ⬆️

July’s jobs report has given asset prices a boost, as a weakening labour market makes it much harder for the Fed to justify hiking rates at its next meeting. Today’s forward guidance looks at how bad employment data is good news for investors.

Elsewhere, it seems even the smartest people betting on the right sector can still come unstuck. We dig into the recent meltdown that saw Situational Awareness go from hero to (almost) zero in just a few days, as the AI trade reminded everyone that money can be lost just as easily as it can be made.

⚔️ Stablecoin Skirmish ⚔️

One of the surest signs that crypto is going mainstream is the embrace of stablecoins by payments giants like Visa and Mastercard. Sure, it’s not as sexy as some crypto super app topping the charts or a memecoin racking up a multi-billion dollar market cap, but it nevertheless shows that TradFi is taking crypto seriously.

Of course, given the inherent PvP nature of crypto overall, it’s no surprise that the stablecoin space is also rabidly competitive. The stakes are high because the rewards are astronomical for those who issue those stablecoins that gain widespread adoption. And now, Visa has just thrown its weight behind one name in particular…

In today’s video, we reveal what this decision means for Visa and the future of stablecoin payments, why the way it works presents a real challenge to the incumbents in the space, and of course, who the lucky winner is.

You can watch that video here.

📈 Crypto Market Forecast 📈

The July jobs report showed a loss of 23,000 nonfarm payroll positions - the first outright contraction in months. The reading came in well below the 83,000 consensus and reversed June's downwardly revised figure. Unemployment is ticking higher.

The implications for monetary policy are significant. The Federal Reserve under Kevin Warsh has been walking a tightrope between persistent inflation and a slowing economy and they’re starting to look decidedly off balance. A negative payrolls print makes any September rate hike much harder to justify politically or economically. The dollar is selling off, Treasury yields are falling, and BTC is over $65,000 at time of writing - the market's reaction is unambiguous. With all due respect to the Clarity Act, the single biggest headwind for crypto over the past eight weeks was the probability of a rate hike and that probability has just taken a tumble.

That’s because an economy that is now losing jobs is not healthy. Corporate earnings, consumer spending and credit quality all deteriorate in a contracting labour market. The AI capex cycle that’s driven equity markets requires corporations that are generating cash flow. If layoffs accelerate from here, the question shifts from "will the Fed hike?" to "will the economy land hard or soft?" For crypto, a hard landing scenario is not straightforwardly bullish - it’s a risk-off event, and risk-off events hit crypto alongside everything else.

For now though, the immediate outlook is cautiously positive. The Clarity Act was confirmed dead before the August recess this week, removing a near-term catalyst, but it wasn’t a surprise and the market had priced in its failure to pass. Brent crude is meanwhile at $82, well down from its $100 spike and reducing the inflation premium. In sum therefore, the July NFP changes the narrative. The base case for the coming weeks is a test of $68,000 to $72,000 as rate hike expectations fall and the dollar continues to weaken. The risk scenario is that the jobs loss turns out to be the beginning of a sharper deterioration in the US economy, in which case the short-term relief rally gives way to a more complex picture by September and October.

We are bullish in the near term, but watching the next unemployment and consumer spending data closely. This is the most significant labour market signal since the 2024 cycle began.

👁️ The Situational Awareness Situation 👁️

At the start of July, Leopold Aschenbrenner's hedge fund Situational Awareness was one of the best performing funds on Wall Street. By the end of the month however, the 24-year-old had sold his public book overnight to Ken Griffin's Citadel at a discount, posted a 67% monthly loss, and sent his investors a letter beginning with the line: "We let you down this month."

While this might be an equities market situation, the red flags underpinning this incident are all too commonly seen among crypto traders. With the rise of tokenised equities having made many crypto traders market agnostic, we wouldn’t be surprised if some of our readers have been running Aschenbrenner's trade book at a 10x leverage on Hyperliquid.

That said, here’s everything you need to know about what went wrong.  

Let’s start with the fund itself. Situational Awareness LP is a long/short equity hedge fund that takes its name from a 165-page essay that Aschenbrenner published in June 2024. A reading of that essay will reveal that Aschenbrenner believed most of the world was severely underestimating the pace and scale at which AI development would unfold in the next decade. In fact, he believed there was a chance AGI could be achieved as early as 2027.

He also argued that the biggest beneficiaries of the AGI race would not only be the software and chip companies but also the ones building the physical infrastructure required to power AGI. In other words, he believed the demand for electricity, GPUs, memory, optical networking, cooling, and data centres would grow exponentially in the years ahead.

With that thesis as its driving force, Situational Awareness would go on to invest in companies like Bloom Energy, SanDisk, CoreWeave, IREN, Nebius and SK Hynix. Each one reflected a bet on the bottlenecks the industry would need to address in its pursuit of AGI. It also ran a short book, pairing put exposure across the semiconductor stack with short positions in the enterprise software companies it expected AI to erode. These include names like Adobe, Nvidia, AMD, Broadcom, Oracle, and ASML.

And while Aschenbrenner had never managed outside money before, these investments saw the fund become one of the highest-performing AI investment vehicles in the world. Its AUM grew from $225 million in 2024 to roughly $45 billion in 2026.

However, this generational run came crashing down last month as the market ran against the fund’s core positions. This started in early July when a sell-off that started in US memory chip stocks spread overnight to Asia. The South Korean market in particular led the carnage, with Samsung and SK Hynix both falling considerably over the month. By the end of July, Aschenbrenner was forced to sell the fund’s public book (longs and shorts together) in a single block transaction to Citadel at a reported 10% discount.

Many were left scratching their heads at this series of events, especially since Aschenbrenner had sent investors an optimistic half-year letter just a few days prior to that sale. Notably, this letter had described the chip selloff as one of the most attractive entry points since early 2025, inviting investors to add funds. Understandably, the market had its own theories on what happened.

One of the more popular ones, which emerged immediately after the sale, was that the sale was a forced event manufactured by Citadel. The idea here was that Citadel Securities had created market stress through a research note it had published in the last week of July. The note, titled "Fed Views: The Case for July", argued that Fed Chair Kevin Warsh had tactical reasons to deliver a surprise quarter-point hike. At the time, markets were pricing roughly a one-in-three chance of a move, so the call landed as a genuine outlier. While the Fed would go on to hold rates steady at its meeting on the 29th July, the market read the move as hawkish, with the Dow closing down 840 points and the 30-year yield up nine basis points. That’s the same day the block trade was executed. Many saw this as Citadel controlling the market. However, if you ask us, this is a bit of an exaggerated outlook. You see, a large reason the market took the FOMC decision as hawkish was due to the three governors who had dissented in favour of a hike. After all, this was the most unified dissent since 2016.

In reality, the real reason the forced trade happened was due to the unchecked and seemingly reckless leverage the fund had taken on its positions. Notably, some reporting put that leverage at as much as 400%. In other words, a 25% drop was all that is needed to wipe the book clean. A WSJ report also states that the fund's offering documents carried no limits on leverage, position concentration or investment scope. Advisory firm Aksia, which looked at the fund in March 2025, had also flagged it as having "risk management issues resulting from overconfidence." Even the fund’s own backers reportedly warned Aschenbrenner about dangerous leverage before the squeeze. Worst of all, reports state that he had withheld monthly performance updates from investors in the run-up to July.

While the fund may have exited its book at a net +81% gain year-to-date, you’d have to imagine not all its investors are happy with the outcome, especially those who entered sometime in the past six months. On a more positive note, the fund’s Anthropic stake, worth about $5 billion, survived. It now makes up roughly half of what is left.

Whether or not Situational Awareness and Aschenbrenner himself can regain their lost glory is something we’ll find out in time. To Aschenbrenner’s credit, it doesn’t seem like he’s given up. Just days after the forced sale, Situational Awareness injected $400 million into an unnamed private company. While that’s commendable, the lesson to take away here is that leverage is a dangerous mistress to trifle with. Even if you’re directionally right on a trade in the long term, mismanaged risk will force a good trade to suffer an early death from short term pressures.

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📖 Quote of the Week 📖

"The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism." - Jason Zweig

Team Coin Bureau

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.