04.02.26 - Speculators in trouble - Unwind in crowded trades
Markets are showing clear signs of a hiccup. Crowded positions are coming under heavy pressure, with previously “untouchable” trades — which seemed to move endlessly higher — starting to unwind. This includes parts of the AI sector, defense stocks, and other high-momentum segments that had attracted significant speculative flows.
Pressure is currently led by cryptocurrencies. Bitcoin has fallen to around USD 72k, levels last seen in 2024. This move is particularly uncomfortable for late entrants. The portfolio of Strategy (formerly MicroStrategy), for example, has an average entry price around USD 76k – meaning the company’s billion crypto exposure has moved into negative territory. The same applies to many other players who added exposure late in the cycle during 2025.
Markets: Unwinding in crowded positions
Equities: broad-based weakness led by technology, with the Nasdaq down almost 2%
Bonds: Yields remain elevated, with the US 10-year yield around 4.28%
Commodities: Precious metals show wide intraday swings – gold spiked to USD 5’100, fell to USD 4’900 and is now back near USD 5’000/oz; silver jumped to USD 92, dropped below USD 85 and rebounded above USD 87/oz
Currencies: The US dollar further stabilized after recent volatility, while safe-haven demand is fading
Cryptos: Continued de-risking pressure, with Bitcoin now below USD 74k
My View: So far, there are still no clear signs of panic. Not all stocks are falling, and correlations have not fully converged into a broad-based risk-off move. However, the environment has become noticeably more fragile, and price action suggests that momentum could turn.
As mentioned yesterday, I remain unconvinced about the near-term outlook for risky asset classes such as equities. Commodities, particularly precious metals, remain the exception for now, but even here speculative positioning needs to be monitored closely.
This is a typical pattern in speculative market phases. In short and to repeat, once momentum turns, highly leveraged positions are forced to unwind. Margin calls accelerate selling pressure, and what initially looks like “healthy consolidation” can quickly turn into a negative and heavy market sell-off in combination with fear. This market pattern would be my favorite to regain substantial weight in equities.
At the same time, cash levels among fund managers remain close to record lows. This is a crucial vulnerability. With little dry powder left, any further deterioration in sentiment forces managers to reduce exposure to risky assets rather than rotate within portfolios. De-risking becomes mechanical, not strategic.
The recent moves underline a key point: the “buy the dip” strategy finally seems to fail, the first time since a longer period with market dips. A good reminder for investors: There is no free lunch.
The strategy has now already failed in parts of the crypto market. If equity markets come under more sustained pressure, the same pattern is likely to play out there as well. In leveraged and crowded markets, dips can quickly turn into trend breaks.
I remain in a defensive wait-and-see stance. Most of my short positions are delivering high positive absolute returns today. With limited upside potential from here, caution is currently the more robust positioning.
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