Author: Liam TechFlow TechFlow
November 21st, Black Friday.
US stocks plunged, Hong Kong stocks plummeted, and A-shares followed suit. Bitcoin once fell below $86,000, and even safe-haven gold continued to decline.
All risky assets collapsed simultaneously, as if held down by the same invisible hand.
This is not a crisis of a particular asset, but a systemic, synchronized decline in global markets. What exactly happened?
Global stock market crash, let's see who's worse off!
Following the "Black Monday" crash, US stocks suffered another sharp decline.
The Nasdaq 100 index plunged nearly 5% from its intraday high, ultimately closing down 2.4%, extending its pullback to 7.9% from its record high on October 29. Nvidia's stock price reversed course after rising more than 5% at one point, closing lower, and the entire market lost $2 trillion overnight.
Hong Kong stocks and A-shares across the ocean were not spared.
The Hang Seng Index fell 2.3%, and the Shanghai Composite Index fell below 3,900 points, a drop of nearly 2%.
Of course, the worst off is the crypto market.
Bitcoin fell below $86,000 and Ethereum fell below $2,800, with over 245,000 people liquidating $930 million in 24 hours.
Starting from a high of $126,000 in October and even falling below $90,000 at one point, Bitcoin not only erased all its gains since 2025 but also fell 9% from the beginning of the year, and a sense of panic began to spread in the market.
Even more alarming is that gold, intended as a hedge against risky assets, also failed to hold up, falling 0.5% on November 21 and hovering around $4,000 per ounce.
Who is the culprit?
The Federal Reserve will be the first to be affected.
For the past two months, the market had been anticipating a December rate cut, but the Fed’s sudden shift in attitude was like a bucket of cold water poured over all risk assets.
In their recent speeches, several Federal Reserve officials unusually adopted a hawkish stance, citing slow inflation, a resilient labor market, and the possibility of further tightening if necessary.
This is tantamount to telling the market:
"A December rate cut? Think again."
CME FedWatch data confirms the speed of the emotional collapse:
A month ago, the probability of an interest rate cut was 93.7%, but now it has dropped to 42.9%.
The sudden collapse of expectations sent the US stock and cryptocurrency markets from a state of shock to one of extreme distress.
After the Federal Reserve dashed expectations of an interest rate cut, the market's focus shifted to only one company: Nvidia.
Nvidia delivered better-than-expected Q3 earnings, which should have ignited tech stocks. However, this "perfect" positive news didn't last long before the market quickly turned green and plummeted from its high.
If good news doesn't lead to price increases, that's the biggest negative factor.
Especially in a cycle of overvalued tech stocks, if positive news no longer pushes up stock prices, it becomes an opportunity to exit.
At this point, Burry, a major short seller who had been consistently short Nvidia, added fuel to the fire.
Burry has published a series of articles questioning the complex multi-billion dollar "circular financing" relationships between Nvidia and AI companies such as OpenAI, Microsoft, and Oracle. He stated:
The actual end-user demand is ridiculously small, with almost all customers being funded by their distributors.
Burry has previously warned of an AI bubble multiple times, comparing the AI boom to the dot-com bubble.
John Flood, a partner at Goldman Sachs, stated bluntly in a report to clients that a single catalyst is insufficient to explain this dramatic reversal.
He believes that market sentiment is currently battered, and investors have fully entered a profit and loss protection mode, focusing excessively on hedging risks.
Goldman Sachs' trading team summarized nine factors contributing to the current decline in US stocks:
Nvidia's gains have run out
Despite better-than-expected Q3 earnings, Nvidia's stock price failed to maintain its upward trend. Goldman Sachs commented that "the real good news not being paid off is usually a bad sign," and the market had already priced in these positive factors.
Concerns about private lending are rising.
Federal Reserve Governor Lisa Cook publicly warned of potential asset valuation vulnerabilities in the private lending sector and the risks posed by its complex links to the financial system, triggering market vigilance and widening overnight credit market spreads.
Employment data failed to reassure people.
While the September nonfarm payroll report was solid, it lacked sufficient clarity to guide the Fed's December interest rate decision. The probability of a rate cut only increased slightly, failing to effectively soothe market concerns about the interest rate outlook.
Cryptocurrency crash spread
Bitcoin's drop below the psychological level of $90,000 triggered a broader sell-off in risk assets, with its decline even preceding the plunge in US stocks, suggesting that the transmission of risk sentiment may have started in high-risk sectors.
CTA sell-off accelerates
Commodity Trading Advisors (CTAs) were already extremely long. As the market fell below short-term technical thresholds, systemic selling by CTAs accelerated, exacerbating the selling pressure.
Air Force re-enters the field
The reversal of market momentum provided an opportunity for the bears, and short became active again, pushing the stock price down further.
Poor performance in overseas markets
The weak performance of key Asian technology stocks (such as SK Hynix and SoftBank) failed to provide positive external support for US stocks.
Market liquidity depletion
Goldman Sachs data shows that liquidity at the top of the S&P 500 index has deteriorated significantly, falling well below the year-to-date average. This near-liquidity makes the market extremely poor at absorbing sell orders, meaning even small sell-offs can cause significant volatility.
Macro trading dominates the market
The surge in the trading volume of exchange-traded funds (ETFs) as a percentage of total market volume indicates that market trading is driven more by a macro perspective and passive funds than by individual stock fundamentals, exacerbating the downward momentum of the overall trend.
Has the bull market ended?
To answer this question, let's first look at the latest views of Bridgewater Associates founder Ray Dalio on Thursday.
He believes that although investments related to artificial intelligence (AI) are driving a market bubble, investors do not need to rush to liquidate their positions .
The current market situation is not entirely similar to the bubble peaks investors witnessed in 1999 and 1929. On the contrary, according to some indicators he monitors, the US market is currently at about 80% of that level.
This doesn't mean investors should sell their stocks. "I want to reiterate that many things may rise before the bubble bursts," Dalio said.
In our view, the drop on November 21 was not a sudden "black swan" event, but a collective run on the market following highly consistent expectations, which also exposed some key issues.
Real liquidity in global markets is extremely fragile.
Currently, "technology + AI" has become a crowded track for global investment, and any small inflection point can trigger a chain reaction.
In particular, the increasing use of quantitative trading strategies, ETFs, and passive funds to support market liquidity has also changed the market structure. The more automated the trading strategies become, the easier it is for a "stampede in the same direction" to form.
Therefore, in our view, the essence of this decline is:
The "structural crash" was caused by excessive automated trading and overcrowding of funds.
Furthermore, an interesting phenomenon is that Bitcoin was the first to fall in this market, marking the first time that cryptocurrencies have truly entered the global asset pricing chain.
BTC and ETH are no longer fringe assets; they have become the thermometer of global risk assets and the forefront of sentiment.
Based on the above analysis, we believe that the market has not truly entered a bear market, but rather a phase of high volatility. The market needs time to recalibrate its expectations for "growth + interest rates".
The investment cycle for AI will not end immediately, but the era of "mindless price increases" is over. The market will shift from expectation-driven to profit realization, whether in the US or A-share market.
As the risky asset that fell earliest, had the highest leverage, and the weakest liquidity in this round of decline, cryptocurrencies experienced the most severe drops, but they also often rebounded first.
