AI fund’s 4x leveraged positions forcibly liquidated
Situational Awareness earned a 439% return in the first half of the year by heavily investing in SanDisk and Micron with 4x leverage. When AI stocks plunged in July, it suffered a 67% drawdown in a single month, then liquidated most of its publicly traded stock holdings, with Citadel taking over a considerable portion. Its third-quarter report won’t be disclosed until November 16.
A 4x leveraged position is governed by its liquidation threshold. After a 67% drawdown, the only way to survive is to cut exposure. Once this capital is pulled out, marginal buying demand for the AI narrative in equities disappears. On-chain AI market-making depth is already thin, so rallies in these assets look more like opportunities to reduce positions, with little support at higher prices. As long as forced-liquidation selling pressure hasn’t run its course, rallies into previous high-volume trading zones are likely to be rejected, and these assets usually fall harder. The bias is bearish; shorting rallies is preferable to chasing longs.
For those of you still holding AI-sector tokens, what’s your cost basis—and would you dare to add before the November 16 holdings disclosure?
$TAO $BTC $ETH
Situational Awareness earned a 439% return in the first half of the year by heavily investing in SanDisk and Micron with 4x leverage. When AI stocks plunged in July, it suffered a 67% drawdown in a single month, then liquidated most of its publicly traded stock holdings, with Citadel taking over a considerable portion. Its third-quarter report won’t be disclosed until November 16.
A 4x leveraged position is governed by its liquidation threshold. After a 67% drawdown, the only way to survive is to cut exposure. Once this capital is pulled out, marginal buying demand for the AI narrative in equities disappears. On-chain AI market-making depth is already thin, so rallies in these assets look more like opportunities to reduce positions, with little support at higher prices. As long as forced-liquidation selling pressure hasn’t run its course, rallies into previous high-volume trading zones are likely to be rejected, and these assets usually fall harder. The bias is bearish; shorting rallies is preferable to chasing longs.
For those of you still holding AI-sector tokens, what’s your cost basis—and would you dare to add before the November 16 holdings disclosure?
$TAO $BTC $ETH