The collapse of global markets: analysis of the perfect storm

November 21. A day that exposed the fragility of global markets. Wall Street suffered heavy losses, Hong Kong collapsed, Chinese stocks declined, Bitcoin plummeted below $86,000, and even gold—traditionally a safe haven—did not withstand the turbulence. This is not a crisis of a single asset but a coordinated crash of the stock market and risky assets on a global scale, triggered by an unprecedented systemic resonance.

Disaster Numbers: How Much Has the World Lost

American stock indices experienced a significant debacle. The Nasdaq 100 lost nearly 5% from intraday highs, closing down 2.4%, increasing the drawdown from the late October peak to 7.9%. NVIDIA, the giant that led the tech rally, briefly gained 5%, only to reverse sharply and close in the red, wiping out $2 trillion in market value in just a few hours.

On the other side of the Pacific, the situation was no better. The Hong Kong Hang Seng index fell 2.3%, while the Shanghai Composite dropped below 3,900 points with a 2% decline. But the real massacre occurred in the cryptocurrency markets. Bitcoin fluctuated around (updated data: $90.79K), Ethereum hit $3,120, and over 245,000 traders were liquidated for a total of $930 million in 24 hours. From its October high above $126,000, Bitcoin erased its 2025 gains and fell over 9% year-to-date, sparking panic among investors.

Even gold, considered the ultimate safe haven against turbulence, offered no protection, losing 0.5% on November 21 around $4,000 per ounce.

What Triggered the Disaster?

The primary responsibility lies with the Federal Reserve. For two months, the market had been lulled into hope of rate cuts in December. But when several Fed officials suddenly adopted a surprisingly aggressive tone—warning that inflation is slowly decreasing, the labor market remains resilient, and further tightening remains on the table—the sentiment instantly flipped.

CME FedWatch data shows the speed of the expectation collapse: a month ago, the probability of a rate cut was 93.7%, today it has plummeted to 42.9%. The stock and crypto markets went from a party to intensive care in just a few weeks.

Subsequently, all attention focused on NVIDIA. Despite Q3 earnings surpassing estimates, the stock failed to maintain its bullish momentum. This is the most powerful bearish signal: when good news fails to push prices higher in an already overvalued sector, it becomes an opportunity to exit long positions.

Michael Burry, the famous short seller, added fuel to the fire by raising questions about the complex cycle of billion-dollar financings linking NVIDIA, OpenAI, Microsoft, Oracle, and other AI companies. He pointed out that the actual final demand is ridiculously low, with clients receiving funding directly from suppliers—a mechanism that suggests structural fragility in the AI boom.

John Flood of Goldman Sachs stated unequivocally that a single catalyst is not enough to explain such a sharp reversal. According to the analyst, market sentiment has severely deteriorated, with investors in defensive mode focusing on risk hedging rather than seeking opportunities.

The Nine Factors Behind the Stock Market Collapse

Goldman’s trading team identified the main drivers of this crash:

1. The exhaustion of NVIDIA’s rally. Despite solid results, the price failed to sustain momentum, confirming that the market had already priced in the positive news.

2. Vulnerability in private credit. Lisa Cook, Fed governor, publicly warned of valuation risks in the private credit segment, with potentially dangerous systemic interconnections.

3. Ambiguous employment data. September non-farm payroll numbers were solid but did not clarify the Fed’s next moves, leaving uncertainty about the direction of interest rates.

4. Contagion effect from cryptocurrencies. Bitcoin’s fall below the psychological level of $90,000 triggered widespread selling of risky assets, with the crypto sector leading the stock decline.

5. Acceleration of CTA selling. Commodity Trading Advisors, previously in extremely long positions, began systematically liquidating as markets crossed critical technical levels.

6. Resurgence of bears. The market reversal reactivated short positions, amplifying downward pressure.

7. Weakness in Asian markets. Tech stocks like SK Hynix and SoftBank struggled, depriving the US market of external support.

8. Liquidity drought. Bid-ask spreads on key S&P 500 securities widened significantly, falling well below the annual average, reducing the capacity to absorb sell orders.

9. Dominance of macro trading. ETF volume as a percentage of total market activity reached record levels, indicating that moves are driven by passive strategies and macro outlooks rather than individual fundamentals.

Is the Bull Really Dead?

Ray Dalio, founder of Bridgewater Associates, offered a moderating perspective. While acknowledging that AI investments have inflated valuations, Dalio advises investors not to rush to liquidate positions. According to his indicators, the US stock market is around 80% of bubble levels seen in 1999 and 1929. His takeaway: “Before a bubble bursts, many things can still go higher.”

Our assessment is that the November 21 crash is not an unforeseen “black swan” event but a collective correction following a phase of excessive optimism that revealed critical structural vulnerabilities.

The Real Issue: Fragile Liquidity and Wild Automation

Global market liquidity is more fragile than it appears. The “Tech + AI” sector has become the hub for global capital raising, and any small trigger can set off chain reactions. The growing role of quantitative trading, ETFs, and passive funds has transformed market dynamics: the more automation increases, the easier it is for a “flight in one direction” to occur.

A relevant point: the crash was led by cryptocurrencies, especially Bitcoin. For the first time, BTC and Ethereum proved to be the true barometers of global risky assets, no longer marginal assets but leading indicators of market sentiment.

In conclusion, the market has not entered a structural bear phase but a period of high volatility where growth and interest rate expectations need recalibration. The AI investment cycle will continue, but the era of “irrational rallies” is over. Markets will shift from a hope-driven dynamic to one based on real cash flows and profitability.

For cryptocurrencies, being the riskiest asset that suffered the harshest decline—with maximum leverage and weaker liquidity—also means being the first to rebound when sentiment stabilizes.