Risky Bets Amped Up Crypto Gains. Now They’re Fueling Their Selloff.

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Alex Ossola (0:18)

Leveraged crypto trades have maximized trader gains, but now they're turbocharging a sell-off.

Vicky Ge Huang (0:24)

If Bitcoin really jumps, you are very likely to get supercharged returns. However, if Bitcoin falls, even just a little bit, you are going to end up in huge losses or maybe even get your entire position wiped out.

Alex Ossola (0:39)

Plus, Target says it will invest billions in stores to try to turn around slumping sales. And why Medicaid patients are having trouble getting doctor's appointments. It's Wednesday, November 19th. I'm Alex Ossola for The Wall Street Journal. This is a PM edition of What's News, the top headlines and business stories that move the world today.

This just in, NVIDIA, the world's most valuable publicly listed company, reported record sales in its latest quarter and provided strong guidance. For more on NVIDIA's earnings, visit wsj.com and we'll have more analysis on tomorrow morning's show. NVIDIA's latest earnings are one of the key data points for investors concerned about the AI boom and valuations of tech companies. Concerns that have weighed on stocks in the past few weeks. Investors are also uncertain about just what the Federal Reserve may do about interest rates at its next meeting in December. The minutes from the October meeting, which are out today, give some insight. They show that divisions over whether the Fed should cut interest rates next month have deepened. There's potentially a narrow majority of policymakers uncomfortable with cutting rates in December. The minutes show that, quote, many officials thought the rate cut wouldn't be warranted next month. A group bigger than the, quote, several that thought a reduction could be appropriate. President Trump at a speech at an investment forum today said that interest rates were too high and that he wanted to fire Fed Chair Jerome Powell. But Treasury Secretary Scott Bessent has advised against it. He also needled Bessent.

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The only thing Scott's blowing it on is the Fed. Because the Fed, the rates are too high, Scott. And if you don't get it fixed fast, I'm going to fire your ass, okay?

Alex Ossola (2:26)

Traders cut bets of a December rate cut to around one in three today after the Labor Department said October employment data wouldn't be published until after the Fed's meeting. Investors appeared to conclude that without additional jobs data, Fed officials would be less likely to back a December cut. The three major stock indexes ended higher today. The Nasdaq led gains, closing up 0.6 percent. The S&P and the Dow each broke four session losing streaks. One big part of this market action over the past few weeks has been crypto, which many investors consider a riskier trade. The rally in crypto prices this year was fueled by debt. Traders amped up their gains using leverage, for example, putting down one dollar of their own money to gain exposure to $100 of Bitcoin. Now, a punishing sell-off over the past two weeks is exposing the dangers of those bets.

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It was a brutal weekend for crypto. Bitcoin sank below $93,000 on Sunday, its lowest level since April.

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The cryptocurrency has struggled to meaningfully recover since a flash crash on October 10th when President Trump reignited his trade war with China.

Alex Ossola (3:31)

Since its all-time high of more than $126,000 hit on October 6th, Bitcoin has fallen more than 25 percent. Vicky Ge Huang, who covers crypto for the journal, says that one of the popular ways that traders make these bets is through contracts called perpetual futures.

Vicky Ge Huang (3:47)

You can bet on the price of a token to go up or go down continuously without ever having to close out the contract. So unlike traditional futures contract where you have a settlement date, you can keep that contract open forever theoretically. And the biggest risk comes from the amount of leverage that you can use. So right now in the US, on Coinbase, you can access up to 10 times of leverage. But overseas, on some of the exchanges there, you can access up to 100 times of leverage. So that can really ramp things up very quickly. So if Bitcoin really jumps, you are very likely to get supercharged returns. However, if Bitcoin falls, even just a little bit, you are going to end up in huge losses or maybe even get your entire position wiped out. So it kind of works like a double edged sword.