Firi Weekly: “Buy the rumor, sell the news”

Crypto Leverage Washout Hits Market:
- Bitcoin futures open interest dropped $4 billion and Ethereum $5.3 billion as overleveraged traders liquidated, causing healthy but brutal market correction.
European Banks Launch Euro Stablecoin:
- Nine major banks including Danske Bank and SEB form consortium to launch euro stablecoin by the second half of 2026, signaling traditional finance's crypto adoption.
Morgan Stanley Offers Crypto Trading:
- E-Trade subsidiary to launch retail crypto trading in the first half of 2026, with plans for tokenizing traditional assets like stocks and bonds.
Digital Euro Timeline Slips to 2029:
- European Central Bank targets 2029 for digital euro launch, potentially missing market opportunity as private stablecoins dominate by then.

Last Week’s Big Three

Nine Major European Banks to Launch Euro Stablecoin: On Thursday, nine European major banks announced that they are joining forces to launch a euro stablecoin. The consortium includes Danske Bank, SEB, ING, Banca Sella, KBC, DekaBank, UniCredit, CaixaBank, and Raiffeisen Bank International. The group has established operations in the Netherlands and plans to appoint a CEO soon. Its goal is to obtain a license as an e-money institution under the supervision of the Dutch Central Bank, with a launch planned for the second half of 2026. The consortium remains open to additional banking partners.

This development represents a fundamental shift in how Europe’s traditional financial sector views digital assets. These institutions, historically skeptical of crypto, are now actively developing products on the same public blockchains. Their entry provides crucial credibility to the broader crypto ecosystem.

Cloudflare to Launch Its Own Stablecoin: The internet infrastructure giant, whose security services protect nearly 20% of all websites globally, announced last week plans to launch NET Dollar, a stablecoin designed specifically for artificial intelligence agents. As AI systems increasingly need to transact autonomously—paying for services or receiving payment for completed tasks—Cloudflare positions itself at the intersection of two transformative technologies. While the company promises an imminent launch, specific timing remains undisclosed.

Cloudflare's entry underscores how stablecoins are attracting players far beyond the traditional crypto and finance sectors. It appears that technology companies recognize stablecoins as critical infrastructure for the digital economy. However, this proliferation of competing stablecoins creates fragmentation challenges that could hamper liquidity and complicate user experience across platforms and networks.

Morgan Stanley To Offer Crypto Trading: The Wall Street powerhouse announced that E-Trade, its retail brokerage subsidiary, will launch cryptocurrency trading for individual investors during the first half of 2026. But Morgan Stanley's ambitions extend well beyond crypto trading. The bank views tokenization—issuing real-world assets like stocks, bonds, and exchange-traded funds (ETFs) as blockchain-based tokens—as a technology that will fundamentally transform wealth management.

This move reflects how established financial institutions increasingly view blockchain not merely as a vehicle for cryptocurrencies, but as transformative infrastructure for all financial assets.

Behind the Charts

Chart 1: Bitcoin and Ethereum Prices During September

The Federal Reserve's (Fed) decision to cut interest rates by 25 basis points two weeks ago appears to have triggered a classic "buy the rumor, sell the news" phenomenon across risk-on assets. Both digital currencies and technology stocks have experienced heightened volatility as traders who positioned ahead of the rate cut rushed to book profits once the news became reality. Bitcoin touched a low of $108,600 last week, while Ethereum found support at $3,825, before both assets recovered slightly over the weekend.

It appears several factors compounded the selling pressure. First, September has historically produced weak returns in crypto markets. Moreover, President Trump's announcement last week of new tariffs on imported pharmaceuticals, heavy-duty trucks, furniture, and other goods reignited fears of an escalating trade war reminiscent of tensions earlier this year.

Chart 2: Bitcoin and Ethereum Futures’ Open Interest

The correction exposed significant leverage across the crypto derivatives market. Many traders appeared to be wrongly positioned, having accumulated leveraged long positions during the recent price rally. The subsequent deleveraging proved swift and brutal. Bitcoin futures open interest fell by $4 billion from September peaks, while Ethereum futures dropped even more—$5.3 billion—further adding to selling pressure.

These periodic leverage “washouts” serve a healthy function in crypto markets, where speculative activity tends to accumulate during price rallies. While painful in the near term, these corrections help build a more sustainable market foundation by clearing overleveraged positions.

Chart 3: Total Stablecoin Supply

We cannot cover stablecoins twice in the “Last Week’s Big Three” section without showing this chart. Year-to-date, total stablecoin supply has surged by $91 billion—a remarkable 44% increase in under nine months.

A Number to Remember

2029

European Central Bank (ECB) board member Piero Cipollone indicated Tuesday that 2029 represents a "realistic timeline" for launching the digital euro. Recent media reports suggest the ECB is also considering a stablecoin format alongside its central bank digital currency plans. However, if the digital euro does not arrive until 2029, private stablecoins will likely have captured dominant market positions, potentially limiting the digital euro's impact and adoption.

On Our Radar

Developments we are closely monitoring:

U.S. Government Shutdown Risk: Federal funding expires at midnight Tuesday, with lawmakers deadlocked over the new fiscal year budget. A shutdown would halt non-essential government services and carry an estimated economic cost of $7 billion per week. Beyond the direct fiscal impact, prolonged shutdowns erode consumer confidence and inject uncertainty into financial markets, potentially triggering risk-off sentiment across asset classes.
"Crypto ETF October" on the Horizon? October 2025 could earn the moniker "Crypto ETF October" as the U.S. Securities and Exchange Commission (SEC)—the federal agency that regulates financial markets—faces final approval deadlines for 16 cryptocurrency exchange-traded fund applications.
U.S.-China Trade Deal Watch: President Trump has recently expressed optimism about reaching a comprehensive trade agreement with China. Any breakthrough would provide relief to global markets, which remain anxious about escalating tariff threats.

Mads Eberhardt29/09/2025

Should not be considered financial advice. Crypto may involve high risk.