Global Market Crash, What Exactly Happened?

Original Article Title: "Global Market Plunge, What Exactly Happened?"

Original Article Author: Liam, Deep Tide TechFlow

November 21, Black Friday.

The US stock market plunged, the Hong Kong stock market plummeted, the A-share market simultaneously declined, Bitcoin briefly fell below $86,000, and even the safe-haven gold continued to slide.

All risk assets seemed to be held down by the same invisible hand, crumbling simultaneously.

This is not a crisis of a particular asset, but a systemic resonance-driven global market downturn. What exactly happened?

Global Plunge, Let's Compare Misery

Following the previous "Black Monday," the US stock market once again saw a major decline.

The Nasdaq 100 index plummeted nearly 5% from its intraday high and ended the day down 2.4%, expanding the retracement from the record high set on October 29 by 7.9%. Nvidia's stock price surged over 5% at one point but reversed to close lower, causing the entire market to evaporate $2 trillion overnight.

The Hong Kong and A-share markets across the Pacific were not spared.

The Hang Seng Index fell by 2.3%, and the Shanghai Composite Index dropped below 3900 points with a nearly 2% decline.

Of course, the most miserable performance came from the crypto market.

Bitcoin fell below $86,000, Ethereum dropped below $2,800, and over 245,000 people were liquidated for $930 million within 24 hours.

Starting from its high of $126,000 in October, Bitcoin not only wiped out all its gains since 2025 but also plummeted below $90,000 at one point, resulting in a 9% decline from the beginning of the year, sparking a wave of panic in the market.

More terrifyingly, as a hedge against risk assets, even gold could not withstand the plunge and dropped by 0.5% on November 21, hovering around $4,000 per ounce.

Who is to Blame?

The Federal Reserve is the primary culprit.

Over the past two months, the market has been immersed in expectations of a "December rate cut," but the sudden shift in the Fed's attitude poured cold water on all risk assets.

In recent speeches, several Fed officials have remarkably collectively turned hawkish: inflation is slow to decline, the labor market is resilient, and when necessary, "further tightening is not ruled out."

This is equivalent to telling the market:

“Rate cut in December? Too optimistic.”

CME’s “FedWatch” data confirmed the speed of the sentiment collapse:

One month ago, the rate cut probability was at 93.7%, but it has now dropped to 42.9%.

The sudden shattering of expectations caused both the stock market and the crypto market to instantly transition from a KTV party to the ICU.

After the Fed punctured the rate cut expectations, the market's main focus was only on one company, NVIDIA.

NVIDIA delivered an earnings report that exceeded expectations in Q3. Normally, this should have ignited the tech sector. However, in a “perfect” twist of events, this bullish news couldn’t be sustained for long and NVIDIA’s stock quickly turned red, experiencing a high-altitude plunge.

When good news doesn’t drive up prices, it’s considered the biggest bearish signal.

Especially in the overvalued tech stock cycle, if good news fails to lift stock prices further, it instead becomes an opportunity to escape.

At this point, the prominent NVIDIA short seller, Burry, added fuel to the fire by continuing to short NVIDIA and raising questions about the intricate multibillion-dollar “circular financing” among NVIDIA, OpenAI, Microsoft, Oracle, and other AI companies. He stated:

The actual end demand is laughably small, with almost all customers having their funding provided by its dealers.

Burry had previously issued multiple warnings about the AI bubble, likening the AI boom to the dot-com bubble.

Goldman Sachs partner John Flood bluntly stated in a client report that a single catalyst is insufficient to explain this intense reversal.

He believes that the current market sentiment is severely wounded, with investors now fully in profit-and-loss protection mode, excessively focused on hedging risks.

Goldman's trading team summarized the nine factors currently leading to the stock market decline:

NVIDIA’s bull run is exhausted

Despite the Q3 earnings report exceeding expectations, NVIDIA's stock price could not maintain its upward momentum. Goldman commented, “Real good news not getting a reaction is usually a bad sign,” indicating that the market had already priced in these positives.

Private credit concerns intensifying

Federal Reserve Governor Lisa Cook publicly warned of potential asset valuation vulnerability in the private credit sector, and its complex interconnection with the financial system could pose risks, triggering market concerns and widening overnight credit market spreads.

Unsettled Employment Data

Although the September nonfarm payroll report was robust, it lacked sufficient clarity to guide the Fed's December rate decision, with the probability of a rate cut only slightly increasing, failing to effectively soothe market concerns about the rate outlook.

Cryptocurrency Collapse Transmission

Bitcoin breaking below the $90,000 psychological barrier triggered a broader risk asset sell-off, with its decline even leading the stock market's plunge, suggesting the transmission of risk sentiment may have originated in high-risk areas.

CTA Selling Acceleration

Commodity Trading Advisor funds (CTAs) were previously in an extremely long position. As the market broke through short-term technical thresholds, systematic CTA selling began to accelerate, exacerbating selling pressure.

Reentry of Bears

The reversal of market momentum provided an opportunity for bears, with short positions becoming active again, pushing stock prices further down.

Poor Overseas Market Performance

The weak performance of key Asian tech stocks (such as SK Hynix and SoftBank) failed to provide positive external environment support for the U.S. stock market.

Market Liquidity Drought

Goldman Sachs data shows that the liquidity scale of top S&P 500 bid-ask spreads has significantly deteriorated, falling well below the year-to-date average level. This zero liquidity state weakens the market's ability to absorb sell orders, with small-scale selling causing significant volatility.

Macro Trades Dominating the Market

The trading volume of Exchange-Traded Funds (ETFs) as a percentage of total market volume has soared, indicating that market trading is more driven by a macro perspective and passive funds, rather than individual stock fundamentals, intensifying 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 investment in Artificial Intelligence (AI) is driving the market into a bubble, investors do not need to rush to liquidate their positions.

The current market situation is not entirely similar to the bubble peaks witnessed by investors in 1999 and 1929. Instead, based on some indicators he monitors, the U.S. market is currently at about 80% of that level.

This does not mean investors should sell their stocks. "What I want to reiterate is that before the bubble bursts, many things may still rise," Dalio said.

In our view, the drop on 11·21 was not a sudden "Black Swan" event but a collective run after highly anticipated events and also exposed some key issues.

Global market liquidity is very fragile.

Currently, "Tech + AI" has become a crowded track for global funds, and any small inflection point can trigger a chain reaction.

In particular, the increasing number of quantitative trading strategies, ETFs, and passive funds supporting market liquidity have also changed the market structure. The more automated trading strategies, the easier it is to form a "one-direction stampede."

Therefore, in our view, this downturn is fundamentally:

A "structural plunge" caused by excessive automation in trading and fund crowding.

Furthermore, an interesting phenomenon is that this downturn was led by Bitcoin, and for the first time, cryptocurrency has truly entered the global asset pricing chain.

BTC and ETH are no longer fringe assets; they have become the thermometer for global risk assets and are at the forefront of emotions.

Based on the above analysis, we believe that the market has not truly entered a bear market, but has entered a high-volatility market phase where the market needs time to recalibrate expectations of "growth + interest rates."

The AI investment cycle will not end immediately, but the era of "mindless rises" has ended, and the market will now shift from expectation-driven to profit-taking. This applies to both U.S. and A-shares.

As the risk asset that fell earliest, with the highest leverage and weakest liquidity in this round of downturn, cryptocurrency experienced the sharpest decline, but rebounds also often occur early.

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