Strategy stress, liquidity strain
Money market indicators are flashing liquidity stress again as crypto underperforms equities
Strategy Executive Chairman Michael Saylor | DAS 2025 New York by Mike Lawrence for Blockworks
This is a segment from the 0xResearch newsletter. To read full editions, subscribe.
Markets came under pressure on Monday as crypto sold off even while rate cut odds stayed elevated. Bitcoin traded lower throughout the session, at one point down more than 6% on the day, before finishing down about 4.5%. The Nasdaq 100 (-0.2%) and S&P 500 (-0.3%) slipped only modestly, while gold (+0.1%) again outpaced BTC and held near recent highs.
It seems that markets remain hyperfocused on United States rate developments. The CME FedWatch Tool now assigns an 87% probability of a 25bps cut in December, and we see the recent move in SOFR, again materially above the Fed’s upper bound, as a clear signal of emerging liquidity and bank reserve stress. When the key overnight secured rate persistently prices through the top of the policy corridor, it suggests that reserves are becoming scarce at the margin and that balance sheet capacity is constrained. All eyes are now on the Fed’s next move, since an adjustment in either balance sheet operations or the administered rates toolkit will be needed to alleviate this tension and re-anchor money market pricing back inside the target range.
Back on the crypto side, performance was broadly weaker as most sector indices underperformed BTC after a difficult month for risk assets. The best performing group was Crypto Miners (+2.3%), which continued to decouple from the rest of the complex, while Crypto Equities (+0.1%) were marginally positive. At the other end of the spectrum, Modular fell 11.3%, Gaming declined 9.1%, and the AI basket dropped 8.1%. Meanwhile, L2, DEX, and DePIN indices also down between 6% to 8% on the day. We view the pattern as consistent with ongoing risk reduction across higher risk tokens, as markets wait for clearer confirmation that the Fed will act to alleviate current liquidity stress concerns.
Market Update
Strategy (MSTR) was front-and-center yesterday as the stock extended its drawdown. Shares traded below $160 on Monday before closing near $171, leaving MSTR down roughly 37% over the past month and down over 60% from July 2025 highs.
We see the outstanding mNAV ratio dipping below 1 in early November and now sliding toward 0.75 as a clear reflection of the current risk-off environment. This dynamic also raises concern about potential cascading effects, since these vehicles can amplify both drawdowns and forced selling if the equity trades at a persistent discount to underlying assets.
Once a vehicle like Strategy trades at a persistent discount to NAV, issuing new equity stops being accretive and becomes value-destructive, which effectively removes one of its main funding levers. That pushes the company toward the other levers — selling bitcoin or selling derivatives on bitcoin — right at the time when both the token and the equity are already under pressure, and markets start to price in that possibility in advance.
However, yesterday’s company announcement disclosures highlight that Strategy has built a roughly $1.4 billion cash reserve funded through recent equity issuance. This is explicitly earmarked to cover at least 12 months of dividends, with a stated goal of extending that to 24 months so that it can keep paying dividends without touching its ~650K bitcoin even in a prolonged drawdown. This announcement helped the stock make up some of its losses yesterday by reassuring investors it could meet its dividend obligations without selling bitcoin.
Source: Strategy
Management cut its year-end BTC price assumption from $150K to a range of $85K to $110K, lowering its BTC dollar-gain target to about $8.4 billion–$12.8 billion and making full-year GAAP earnings highly sensitive to the final BTC print. On the investor call, they highlighted that a year-end BTC price below roughly $94K would mean operating at net losses, while a price above $94K would support positive income.
Source: Strategy
Leveraged ETFs built around the Strategy trade are bearing the brunt of the move, with MSTX and MSTU, which target 2x Strategy’s daily return, are among the 10 worst performing US ETFs this year after losses of more than 80%. The newer MSTP is down a similar amount since launch, and the trio’s value has shrunk from over $2.3 billion in early October to about $0.8 billion today. Together these products show how a 60% drawdown in the stock and a 30% pullback in BTC can be magnified by volatility decay, where compounding gains and losses can chip away at returns even if the stock ends flat. This has left the late retail buyers with heavy losses, turning the once-popular levered MSTR trade into a textbook case of negative reflexivity.
HumidiFi’s ICO: Dark AMM, darker disclosures
HumidiFi’s WET token sale will take place tomorrow, Dec. 3. WET will be the first ICO on Jupiter’s Decentralized Token Formation (DTF) platform, with trading available on Meteora and HumidiFi at TGE on Friday, Dec. 5. For context, HumidiFi is a prop AMM developed by Temporal, a Solana-native R&D firm. Aside from HumidiFi, Temporal also runs Nozomi, a transaction landing service on Solana, and Harmonic, a block-building system aiming to compete with Jito. Ahead of the ICO, the team published an article with WET’s tokenomics.
WET will have a max supply of 1 billion tokens, with 10% allocated to ICO participants. Eligible participants in the ICO fall into three categories:
- Wetlist (6%), reserved for whitelisted wallets, including “HumidiFi users, HumidiFi active and meaningful contributors, and HumidiFi’s Discord community.”
- JUP Stakers (2%).
- Public Presale (2%), to be conducted on a first-come, first-served basis.
In the announcement, HumidiFi noted that a snapshot was taken on Nov. 11 to determine the pre-sale allocation reserved for HumidiFi users (i.e., top traders). The chart below shows that traders with a lifetime volume of over $100 million have historically accounted for more than 50% of HumidFi’s daily volumes. These wallets are most likely market makers and arbitrage bots, and will likely be whitelisted for the sale.
The table below shows WET’s token distribution and unlock schedule. As mentioned, 10% will be allocated to ICO participants, with the remaining 90% distributed between the Zero Position Foundation (40%), Ecosystem (25%), and Labs (25%).
Presumably, the Foundation will be run by Temporal, though the announcement never attributes the operation of Zero Position to any specific entity, leaving this information undisclosed a day before the ICO. The Labs allocation in the token distribution table likely refers to Temporal as well, given its role as HumidiFi’s core engineering contributor. The announcement also notes that HumidiFi has benefited from a broader ecosystem of partners, including engineering teams, market makers and liquidity providers, suggesting that the Ecosystem bucket will likely be used to incentivize and reward these contributors.
WET will launch with a 23% float, somewhat reminiscent of the low-float, high-FDV token launches that have historically plagued Solana DeFi (e.g., JTO, KMNO, JUP). It is surprising, to say the least, that the Temporal team decided to launch with a low float, given how the market has punished these tokens over the past two years. As shown below, 19.25% of the total supply (192.5 million tokens) will be unlocked every six months over two years from the TGE.
In terms of fundamentals, HumidiFi has consolidated as the top prop AMM by trading volume over the past few months. It accounted for 51% of SOL-stablecoin volumes on the chain in November, and for 36% of total Solana DEX volumes, surpassing all other DEXs, including “traditional AMMs” such as Orca, Raydium and Meteora.
Not only does HumidiFi dominate Solana DEX volumes market share, it also eclipses most CEXs in spot SOL-USD volumes. The chart below shows that HumidFi is averaging over $1 billion in daily SOL-USD volumes, recently surpassing Binance as the top venue. HumidiFi’s quick rise to the top from its launch in June showcases the incredible progress that the core team has made on prop AMM design.
Up until now, there hasn’t been a clean way to gain direct exposure to prop AMMs. The only way to express the view that prop AMMs would increasingly dominate volumes for liquid pairs on Solana was to short traditional AMM tokens like RAY and ORCA. Unfortunately, it seems WET will not provide the vehicle investors have been waiting for.
In terms of token utility, users will be able to stake WET to earn fee rebates, with the team explicitly noting that “WET is not and should not be viewed as an investment.” A day before the token sale, several questions remain unanswered. Why is a profitable prop desk raising funds via an ICO? Does the token represent any ownership rights on the prop AMM? Who will govern the foundation, which has been allocated 40% of the supply? Only time will answer these questions, and only time will tell whether WET accrues any value or simply serves as the latest free advertisement for MetaDAO.
Get the news in your inbox. Explore Blockworks newsletters:
- The Breakdown: Decoding crypto and the markets. Daily.
- 0xResearch: Alpha in your inbox. Think like an analyst.
