Hey, Gavin here with your weekly recap of all things internet & money:

🔎 Did someone profit big on the Hamas attacks?
🚀 Yet another crypto rally
📲  Coinbase launches pay-by-link …

….and more!

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STORIES OF THE WEEK

1. The trading scandal that wasn’t? 🔎

It’s a twist that sounds like it's straight out of a spy thriller. Researchers published a (non-peer reviewed) journal article that seemed to suggest that investors with advance knowledge of the Hamas attack on October 7 used this insight to short Israeli stocks and net billions.

The analysis found that Israeli securities saw a notable surge in short-selling just before the October 7 attacks. This wasn't just any uptick in market pessimism. Short interest in the MSCI Israel ETF and shares of major banks like Leumi apparently spiked dramatically, in a way that “far exceeded the short selling activity that took place during the Covid-19 pandemic, the 2014 Israel-Gaza war and the 2008 global financial crisis”.

• 🔢 Digits: Short-selling in Leumi netted an estimated 3.2 billion shekels ($862 million) in profit

• 💬 Words: "Days before the attack, traders appeared to anticipate the events to come" 

What it means →

In the Matt Levine universe where everything somehow links back to insider trading, this situation fits right in. And if you're already an international pariah, dabbling in a bit of market manipulation might not seem like a big leap.

But after making waves in the press, it turns out that the reliability of the research is under scrutiny. Tel Aviv Stock Exchange officials pointed out a glaring error: the researchers confused shekels with agorot (a denomination of the Israeli currency), which skewed the calculations massively.

Now, the Israel Securities Authority appears to be dropping its investigation into the issue. It seems like a story that was too whopping to be true, which means it will probably become the plot of the next Mission Impossible movie.

2. What goes down must come up 🚀

Just when you thought you were out, Bitcoin drags you back in.

Bitcoin has surged past $42,000, a whopping 150% rise this year, and it's not just the big names riding the wave. This surge isn't a lonely ascent; Ethereum and other altcoins have joined the party, with altcoin trading volume hitting a peak not seen since early 2022. Analysts speculate that this unexpected rally is fueled by a mix of optimism over potential Bitcoin ETFs, interest rate speculation, and perhaps a sprinkle of seasonal cheer.

• 🔢 Digits: Bitcoin briefly touched $45,000, a dramatic rebound from its low point near $15,000 post-FTX collapse

• 💬 Words: “FOMO and YOLO seem to be back”

What it means → 

In a market as unpredictable as crypto, pinpointing the source of the exuberance is like trying to nail jello to the wall.

Is it the crypto equivalent of a Santa Claus rally, when markets rise due to that totally logical combination of festive cheer, institutional investors taking a break, and retail investors taking the wheel with their holiday bonuses?

The Bitcoin ETF news makes some sense as a driver. I suppose you could also make the argument that there’s a broader shift in investor sentiment, a readiness to dive back into riskier assets, possibly driven by hopes of regulatory clarity and a more stable interest rate environment.

But if you poke around crypto Twitter, it seems like the typical reaction is “there’s no real reason why this number should be going up”. Is there any other asset class that goes through the same cycles that crypto does?

Irrational exuberance followed by crash followed by ignominy followed by irrational exuberance...∞

It seems to be an article of faith at this point that the market is cyclical and crypto will keep bouncing back. I’m not sure that’s true, but for now it seems everyone is along for the ride.

Byte of Bliss

Senator J.D. Vance — a politician, it’s worth noting — asking what seems to be a fairly obvious question of big bank CEOs:

— Gavin