What exactly happened during the global crash?

Written by: Liam｜Deep Tide TechFlow

November 21, Black Friday.

U.S. stocks plummeted, Hong Kong stocks fell sharply, A-shares also declined, and Bitcoin briefly dropped below $86,000, even safe-haven gold continued to decline.

All risk assets seemed to be pressed down by the same invisible hand, collapsing simultaneously.

This is not a crisis of a specific asset, but a systemic decline in the global market. What exactly happened?

Global Plunge, Let's Compare Misery

After experiencing "Black Monday," U.S. stocks faced another significant drop.

The Nasdaq 100 index plummeted nearly 5% from its intraday high, ultimately closing down 2.4%, with a pullback of 7.9% from the record high set on October 29. Nvidia's stock price, which had risen over 5%, turned negative by the close, and the entire market evaporated $2 trillion overnight.

Across the ocean, Hong Kong and A-shares were not spared.

The Hang Seng Index fell 2.3%, and the Shanghai Composite Index dropped below 3,900 points, down nearly 2%.

Of course, the most miserable situation belongs to the cryptocurrency market.

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

Since the peak of $126,000 in October, Bitcoin has not only erased all gains since 2025 but also dropped 9% from the beginning of the year, with a wave of panic spreading through the market.

Even more frightening is that gold, as a "hedge" for risk assets, also couldn't hold up, falling 0.5% on November 21, hovering around $4,000 per ounce.

Who is to Blame?

The Federal Reserve is at the forefront.

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

In recent speeches, several Fed officials rarely adopted a hawkish stance: inflation is declining slowly, and the labor market remains resilient, stating that they "do not rule out further tightening if necessary."

This essentially tells the market:

"Rate cut in December? You're thinking too much."

CME's "FedWatch" data confirmed the speed of the emotional collapse:

The probability of a rate cut, which was 93.7% a month ago, has now dropped to 42.9%.

The sudden collapse of expectations caused U.S. stocks and the cryptocurrency market to instantly shift from KTV to ICU.

After the Fed pierced the rate cut expectations, the market's focus turned to only one company: Nvidia.

Nvidia delivered an earnings report for Q3 that exceeded expectations, which should have ignited tech stocks, but such a "perfect" positive news didn't last long and quickly turned negative, plunging from high levels.

When good news doesn't lead to a rise, it becomes the biggest negative news.

Especially in a cycle of overvalued tech stocks, if good news no longer pushes up stock prices, it instead becomes an opportunity to flee.

At this time, the persistent short-seller of Nvidia, Burry, also added fuel to the fire.

Burry repeatedly questioned the complex multi-billion dollar "circular financing" between Nvidia and AI companies like OpenAI, Microsoft, and Oracle, stating:

The real end demand is laughably small, and almost all customers are funded by their distributors.

Burry has previously issued multiple warnings about the AI bubble, comparing the AI boom to the internet bubble.

Goldman Sachs partner John Flood bluntly stated in a report to clients that a single catalyst is not enough to explain this drastic reversal.

He believes that the current market sentiment is battered, and investors have fully entered a profit and loss protection mode, overly focused on hedging risks.

Goldman's trading team summarized nine factors currently leading to the decline in U.S. stocks:

Nvidia's Positive News Exhausted

Despite the Q3 earnings report exceeding expectations, Nvidia's stock price failed to maintain its upward momentum. Goldman commented that "real good news not being rewarded is usually a bad sign," indicating that the market had already priced in these positives.

Concerns Over Private Credit Intensify

Fed Governor Lisa Cook publicly warned of potential asset valuation vulnerabilities in the private credit sector and the complex connections with the financial system that could pose risks, raising market vigilance and widening overnight credit market spreads.

Employment Data Failed to Reassure

Although the September non-farm payroll report was robust, it lacked sufficient clarity to guide the Fed's rate decision in December, with only a slight increase in the probability of a rate cut, failing to effectively calm market concerns about interest rate prospects.

Cryptocurrency Crash Transmission

Bitcoin's drop below the psychological threshold of $90,000 triggered a broader sell-off of risk assets, with its decline even preceding the sharp drop in U.S. stocks, suggesting that the transmission of risk sentiment may have begun in high-risk areas.

CTA Selling Accelerates

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

Short Sellers Re-enter the Market

The reversal of market momentum provided opportunities for short sellers, and short positions began to reactivate, pushing stock prices further down.

Poor Performance in Overseas Markets

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

Market Liquidity Deteriorates

Goldman data shows that the liquidity of top buy and sell orders in the S&P 500 index has significantly worsened, dropping far below the average level for the year. This zero liquidity state severely hampers the market's ability to absorb sell orders, with small-scale sell-offs leading to significant volatility.

Macro Trading Dominates the Market

The trading volume of exchange-traded funds (ETFs) has surged, indicating that market trading is increasingly driven by macro perspectives and passive funds rather than individual stock fundamentals, intensifying the overall downward momentum.

Is the Bull Market Over?

To answer this question, let's first look at the latest views from Ray Dalio, founder of Bridgewater Associates, on Thursday.

He believes that while AI-related investments are 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 about at 80% of that level.

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

In our view, the drop on November 21 was not a sudden "black swan," but a collective squeeze after highly consistent expectations, while also exposing some key issues.

The true liquidity of the global market is very fragile.

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

Especially now, with more quantitative trading strategies, ETFs, and passive funds supporting market liquidity, the market structure has changed; the more automated trading strategies there are, the easier it is to form a "stampede in the same direction."

Therefore, in our view, this drop is essentially a "structural crash" caused by excessive automation in trading and fund crowding.

Additionally, an interesting phenomenon is that this drop was led by Bitcoin, marking the first time cryptocurrencies have truly entered the global asset pricing chain.

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

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

The investment cycle for AI will not end immediately, but the era of "mindless increases" is over; the market will shift from expectation-driven to profit realization, applicable to both U.S. and A-shares.

As the risk asset that has fallen the earliest, with the highest leverage and weakest liquidity in this downturn cycle, cryptocurrencies have dropped the most but often rebound first.

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