GM. This is Dumb Money — the only financial newsletter with a 100% loss rate.
The market rallied all week. Bitcoin hit $78,000. Stocks kept climbing. Everything went up.
And yet. Three people still managed to lose a combined $297,000. That takes a special kind of commitment.
Here's what we've got today:
🏆 A 20x BTC short during the biggest squeeze in nearly five years. Liquidated in 3 hours.: $186,900
☕ Coffee futures based on a weather app. The frost never came.: $71,200
⚡ 500 VIX calls betting on a September crash. September hadn't started yet.: $38,900
📊 The data on today's carnage. It is worse than you think.
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| TODAY'S DAMAGE REPORT 📊 | |||||||||
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LOSS OF THE DAY 🏆
Every day we crown one person who made the worst financial decision on the internet.
Today's winner bet against the biggest short squeeze in nearly five years. With 20x leverage. On purpose.
Here's the setup. On August 18, a trader on r/cryptocurrency opened a 20x short position on Bitcoin at $64,200.
His thesis was clean. The Fed Chair had been hawkish all summer. Rates aren't coming down. There's no reason for BTC to be trading above $60K.
One problem: 52% of the futures market agreed with him. When the majority of traders are on the same side of a leveraged trade, that's not consensus. That's a trap.
On August 19, Bitcoin surged from $64,200 to $69,500 in six hours. $1.74 billion in short positions liquidated across every exchange. The rally hit $78,000 by August 21.
His 20x short was liquidated at $67,400. Three hours and fourteen minutes after he opened it. $186,900 gone.
He posted the screenshot with the caption: "I was early, not wrong."
Brother. In leveraged futures, early IS wrong. That is literally the only thing that matters. The position didn't survive long enough for him to finish his coffee.
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Quick explainer on short squeezes: when too many traders are betting against an asset, a small price increase forces some to buy back their positions to limit losses. That buying pushes the price higher, which forces more shorts to close. Chain reaction. On August 19, this chain reaction wiped out $1.74 billion in short positions in 24 hours. 92% of all liquidations were shorts.
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TODAY'S CASUALTIES 💀
Not everybody can be Loss of the Day. But these two gave it a real shot.
Let's run through the tape.
Casualty #1: The Weather App Trader
There's a special kind of confidence that comes from checking a weather app and then betting $71,200 on agricultural commodities.
u/arabica_or_bust went long 12 coffee futures contracts after reading a tweet about potential frost in Brazil's Minas Gerais region. His due diligence was a screenshot of a weather forecast showing temperatures near 2°C.
One problem: the forecast updated the next day. Frost never arrived. Coffee dropped 22% over 9 trading days.
On day 6 he got a margin call. Instead of closing, he added 4 more contracts. "Averaging down," he called it.
By day 9, the position was liquidated. $71,200 gone, including the $18,000 he added on the double-down.
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He's now posting on r/coffee. The beverage subreddit. Not the commodity one. Probably for the best.
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Casualty #2: The September Crash Prophet
Every year around late August, someone discovers that September is historically the worst month for stocks. They read the stat. They see the pattern. They decide to profit from it.
u/vix_has_to_spike bought 500 VIX $28 calls in the third week of August. Total outlay: $41,400.
His thesis: VIX was at 16. September is always bloody. The Fed is hawkish. VIX would spike to 35 by mid-month.
Here's the thing. VIX didn't spike. It dropped. From 16 to 14 as the market rallied through the last week of August.
His 500 calls lost 94% of their value in 11 trading days. $38,900 gone.
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Quick explainer on the VIX: the VIX measures how much the market expects the S&P 500 to move over the next 30 days. When traders are scared, VIX goes up. When markets are calm, VIX drops. Buying VIX calls is a bet on fear itself. If fear doesn't arrive on schedule, the calls bleed to zero. Slowly. Every single day.
He posted the P&L captioned: "September hasn't even started yet." It hasn't. But his money is already gone. Options have expiration dates. The market doesn't care about your calendar.
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TODAY BY THE NUMBERS 📊
We track the data because the data is funnier than anything we could make up.
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The correlation between conviction and portfolio destruction remains undefeated.
Every trader featured today was certain they were right. The BTC shorter had a macro thesis. The coffee trader had a weather forecast. The VIX buyer had seasonal data going back to 1950. The market didn't care about any of it.
See you tomorrow. The numbers will be different. The behavior won't be.
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