Stocks have fallen more sharply than in the crypto world; where has the money gone?

Author: Cathy, Plain Language Blockchain

On July 28 and 29, Seoul. The Kospi index triggered a circuit breaker for two consecutive days, something that has never happened in the history of the South Korean stock market.

On the first day, it fell by 10.84%, and on the second day, it fell another 5.98%. The largest weighted stock, SK Hynix, saw a cumulative drop of about 23% over the two days. The Nasdaq plummeted, global semiconductor stocks collectively collapsed, and leveraged ETFs fell in droves.

By the end of the two days, the Kospi's pullback from its June peak widened to 40%, and July was on track to become the worst month on record for this index.

All the previously crowded trades were like a table flipped by the same hand.

This is not a negative event for a specific stock, but a global forced deleveraging. The most counterintuitive part is: this time, it is stocks that are falling like the "crypto circle."

01 The Pain Ranking

First, let's look at the spot market. SK Hynix reported an operating profit of 60.54 trillion won in the second quarter, a record high, but because it fell short of LSEG's estimate of 64.22 trillion, it faced devastating sell-offs, closing at 140.1 thousand won on July 29.

Good news that doesn't lead to a rise is the biggest bad news. Just after its glorious listing on the Nasdaq, its stock price fell below the issuance price of $149.

Even worse are the derivatives. The double long SK Hynix ETF (07709.HK) from Southern Eastern dropped from a peak of 193.65 Hong Kong dollars on June 25 to 32.7 Hong Kong dollars on July 29, a decline of 83%.

This product had a peak size of over 1.3 trillion Hong Kong dollars, claiming to be the world's largest single-stock leveraged ETF. A month later, over 1 trillion Hong Kong dollars in market value evaporated.

The issuer was forced to modify product rules: starting August 3, the leverage of 12 individual stock products was changed from a fixed 2x to a minimum flexible leverage of 1.1x, with the ratio determined by fund managers daily. Korean regulators plan to restrict retail investors from buying leveraged ETFs.

The most surprising scene is: Bitcoin, known for its high volatility, rebounded from a low of $57,800 on July 1 to around $66,300, an increase of nearly 15%.

Stocks have fallen into the appearance of the crypto circle, while Bitcoin lies still, playing dead.

02 Who Caused the Crash

First, let's look at a set of data. From the peak on June 22, the S&P 500 fell only 2.1%, the Nasdaq fell 6.6%, but the Philadelphia Semiconductor Index plummeted by 28.6%.

This is not a panic across the entire market; it is precise targeted demolition: whoever has the most crowded long positions suffers the deepest cuts.

The catalysts came from two directions. On one side is SK Hynix's earnings report, which set a record profit but fell short of expectations.

On the other side is the Chinese variable: Changxin Storage completed the largest IPO in Asia for 2026, raising funds for DRAM expansion, and the narrative of AI memory shortages finally has a competitor.

Tokyo is also applying pressure from behind. The Bank of Japan raised interest rates to 0.75% in December 2025, the highest in thirty years; the ten-year Japanese government bond yield climbed to around 2.9% in July, a high not seen since 1997.

The market estimates that the scale of the yen carry trade is between $300 billion and $500 billion, becoming another sword hanging over global risk assets. UBS states that this round of carry trade liquidation has only completed half.

Famous tech investor Dan Niles believes: this is not a collapse of AI logic, but a "short-term bottom" created by forced liquidations of retail investors and hedge funds. Major brokers fear a repeat of the Archegos collapse and are accelerating the cleanup.

He even thinks this is just a slowdown in the AI supercycle: the top 1% of companies are conserving computing power, while the remaining 99% are still ramping up.

The industrial logic is not dead; what is dead is leverage.

03 Bitcoin Didn't Receive Money, It Just Took Its Beating Early

So, did the money that ran out of the stock market flow into Bitcoin?

No. Bitcoin's "resilience" is because it took its beating early.

From May 15 to June 3, the U.S. spot Bitcoin ETF saw net outflows for 13 consecutive trading days, totaling about $4.4 billion, the longest record in history. During the same period, Bitcoin fell from around $80,000 to $63,000, a drop of about 21%.

In June, the net outflow was about $4.5 billion, the worst single month since the spot Bitcoin ETF was launched. Nearly 80% of the outflows came from BlackRock's IBIT fund.

The chips that needed to be washed were already cleaned out in June. By the time tech stocks were hit in July, Bitcoin had little left to drop.

What about the inflow in July? From July 14 to 22, there was a net inflow of about $981 million over seven consecutive trading days, the longest and largest inflow since 2026. Leading the charge was still IBIT. Last month, it was also the one leading the outflow.

It sounds like a lot, but compared to the bloodletting in May and June, this is just a drop in the bucket. Some analysts have calculated: to fill that hole, several months of continuous buying are needed.

Where did the real safe-haven funds go? Gold. By the end of July, gold prices stood at $4,086 per ounce, up more than 20% year-on-year.

According to CryptoQuant data, the 30-day correlation coefficient between Bitcoin and gold once dropped to -0.88. The last time it was this low was during the depths of the 2022 bear market.

The narrative of "digital gold" has been torn apart by empirical data in this round of crisis. Institutions have placed the two in completely different baskets: gold is used for survival, while Bitcoin is used for speculation. They no longer compete for the same pot of money.

The path of capital withdrawal is brutally clear: first, withdraw from overvalued tech stocks to cash and U.S. Treasuries, then flow into gold. Bitcoin stands at the far end of the risk curve, and it is not yet its turn for the first round of safe-haven.

However, there are hidden dangers. At the end of June, MicroStrategy announced for the first time a $1.25 billion Bitcoin "monetization" authorization, establishing a formal selling framework for the first time in the company's history. Once the largest buyer, it is now leaving itself an exit.

04 When Will the Money Really Come

Three conditions: global liquidity pressure eases; the Federal Reserve lowers interest rates without an economic recession; the CLARITY Act is implemented, eliminating Wall Street's last compliance concerns.

The third condition is the most subtle. This bill passed the House of Representatives in July 2025 with a high vote of 294 to 134, with 78 Democrats voting in favor, seemingly a clear path.

However, in July 2026, it got stuck in the Senate and missed the vote before the August summer recess. The reason for the deadlock is political: Democrats believe the ethical clauses restricting Trump's crypto interests are not strict enough, while banking lobby groups oppose the interest-bearing provisions for stablecoins.

SEC Chairman Paul Atkins has already stated: if Congress does not pass it, the SEC will set its own rules. This sword still hangs overhead.

However, a direction has emerged. Bitcoin peaked at $126,000 in October 2025 before undergoing a deep correction, and its correlation with the Nasdaq is loosening.

The pricing of tech stocks looks at AI capital expenditures and corporate profits, while Bitcoin's pricing looks at global liquidity. During times of easing, they appear to be one family, but when pressure tests come, they part ways.

And this low correlation is precisely what institutions desire. BlackRock's research report suggests that institutional portfolios can allocate 1% to 2% to Bitcoin. Funds scared by single bets on AI will eventually seek assets that do not follow the Nasdaq.

Bitcoin is not a safe haven now; it is merely an early liquidator that has nothing left to drop.

But when the storm passes and global capital is redistributed, it will be at the front of the line.

The money has not yet arrived, but the position has already been secured.