韩国股市暴跌40%，AI交易遭清算，加密未受影响

Welcome back to the station to the weekly rollup. It is the fifth Friday of July and we have all of Korea getting liquidated two trillion dollars erased. That's 1.2 million accounts getting margin called. The the Kopsi k o p s y this is the Korean stock market down 40% imagine your stock market Ryan being down 40% in the month of July. Well, that's that's what Korea's Korea's got going for it. Uh and we also have breaking as of this morning highly related highly correlated the poster child of the AI trade is now a forest seller cuz he took on a little too much leverage while your first cycle bro.

It's a learning lesson learning [laughter] learning lesson had to unwind his entire public book book. We'll talk about who the buyer is and why that might be the bottom cuz that is maybe why stocks are very very green this morning after a pretty terrible month. But Ryan in all of that after all of that mess the AI trade unwinding maybe bottoming who knows the the stock market coming off yields going up all of this bearish stuff crypto did not blink.

Crypto is up this week. showing unique strength

That that's crazy. That I is you're you're saying on this week it was actually a good thing to own crypto rather than AI.

Yes if you were if you owned crypto not actually not all crypto but if you owned Bitcoin or ETH crypto blue chips specifically

Okay.

You are you are a happy person this week.

We'll talk about that. That that might be winds changing. Like this month winds changing?

Is AI deflating and crypto's just being a hard asset class that's great.

Uh also I want to get into the Warsh. So Kevin Warsh as the Fed chair his first FOMC meeting there was a vote. What did they decide to do? What's he going to do as Fed chair? We'll talk about that. Also, Clarity Act feels like it's stalling once again, but Paul Atkins, the chair of the SEC, came in and said he is ready, willing, and able to do it for you guys. He'll just make regulation instead.

He'll just do it himself.

I'll take care of clarity. Anyway, we'll talk about that. And also, we got to celebrate Ethereum's 11th birthday. But first, let's get to the main story, which is the COPSI, as you said. So, c o p s i, I should say. And I was just laughing not at people getting liquidated, but said all of South Korea, all of Korea was getting liquidated. Which feels like a lot, but that's not too far off, because there was a lot of retail involved in these recent market moves.

And you said they lost about 40%, but that is because they were also up by about what? Like double or something like this over the past 6 months. Talk about this story.

If you're if you were in the Korean stock market, the Korean industry, before like 2 months ago, you're actually doing just fine. So, it was up like something like 2 or 300% and then and then it fell down 45%. You know, what goes up so fast must come down. I think anyone in the crypto industry is probably pretty familiar with a chart that looks exactly like that. But what is unique here is just the level of liquidations that happened to retail investors.

We don't really know, so kind of in the same vein as crypto wallets aren't really one-to-one mapped with humans. Accounts are not one-to-one mapped with humans, more so than crypto wallets. But there was an estimated 320 to 360,000 accounts were fully liquidated, zeroed out.

Wow.

Which if you if you do map that one-to-one, that is 3.4% of South Korea's adult population got margin called.

To zero in July.

To zero. To zero.

To zero, yeah.

Wow.

For yeah, of over 500,000 accounts. And and the that that 320 to 360 estimate, that was from last week, not even not even this week. So, potentially like over half a million accounts fully liquidated because it went down 40% in 40 days. A very very important part of this story was that the South Korean stock market recently introduced leveraged single stock ETFs. So, like pay Micron or pay like memory stonk that you got there.

And and also, by the way, ways South Korea has like an unprecedented level of exposure to memory stocks

market. That that's why

in in their market, yeah.

markets have been moving on the memory stock trade downstream of the AI trade and all of that. A lot of that is located in South Korea.

Yeah, SK Hynix and Samsung being the two memory stocks that have outperformed massively and combined at the top, those two companies represented more than 50% of the stock market. And so, you put like the epicenter of all markets, which is memory stocks in the last like month or two, you add single stock leveraged ETFs, and then you know, well, you didn't you didn't really go to crypto conferences, Ryan, but like you would go and how how go to a crypto conference, hop in an Uber, and then your Uber driver would be talking to you about like XRP or like Cardano.

Oh, yeah.

Apparently, that's what it's been like over there in South Korea is is like their leveraged single stock memory stock ETFs.

Yeah.

Uh and so, it's just like an absolute bloodbath in Korea over there.

Uh so, $2 wiped off the books uh as a result of this. A lot of, I'm sure, margin being called in big trading desks as well. So, a lot of people feeling this. I guess with the leveraged ETFs, what, you know, people were like, "Uh I I rather than 5x, I could have 10x if I buy the thing that goes up, and I'm just going to buy the thing that goes up." And

buy the leveraged ETFs in my margin account on margin.

Oh my [laughter] god. All right. Well, this does look like a crypto chart. So and it sounds very much like a a crypto story. Um is there a broader take on AI though here? So like could this be the beginning of the AI I'm going to use the B word bubble. I know it's a charged term, but let's say the AI trade the AI bubble unwinding.

Unwinding I think kind of implies that it's going backwards. I don't necessarily know if that's true, but like I think it is a pretty strong point in the argument that it is the AI trade ceasing to be so dominant in the market. Like maybe the great AI repricing is is starting to like be kind of over because prices is determined at the margins. I think you would kind of expect to see micro bubbles inflate and then get popped along the way.

It could be inside of a larger bubble, but ultimately I I I think you would would kind of expect something like this to happen regardless. The timing however is interesting to talk about a few other things that are also happening in the market. Now this is my personal speculation. I haven't like read anything about this, but I do think that Kim I K3 is illustrative or indicative of the reshuffling of where the market is perceiving value to be captured in the AI stack in the AI like vertical.

And Noah our one of our favorite writers Noah opinion wrote an article about this actually like back in December of last year. And the title is of the article is the AI bust that no one sees seeing coming very easy title. He gives like three scenarios to like the future of the AI industry. One is the virtual reality scenario where kind of like VR we all know VR is a thing, but it's just not getting adopted. It's just kind of a bust of an industry, maybe it'll come in the future, but just not really working out.

And like Noah just kind of quickly moves on from this scenario. It's like it's worth thinking about, but not really worth discussing because like we know that people on a recurring basis come back to AI over and over and over again, unlike their dusty Apple VR helmet that they have left in their closet. So that's the first scenario. The second scenario is the railroad scenario. And railroads were super economically useful.

There was a huge financial boom associated with the the railroads. Nonetheless, even though railroads were created an economic boom downstream of them, and they were massively profitable for instance investors, there was still a huge bust in 1873 railroad had