Why are global risk assets collectively declining? What is the underlying logic behind this?

The market crash on November 21st may seem sudden, but it was actually foreshadowed long ago. US stocks, Hong Kong stocks, and A-shares all plunged simultaneously, with Bitcoin dropping from a high of $126,000 to around $86,000, and Ethereum falling below $2,800. This is not an isolated crisis in a particular sector but a systemic resonance.

What exactly happened to cause all risk assets to spiral out of control at the same time?

Data Dialogue: Whose Drop Is the Most Shocking

On the US stock front, the Nasdaq 100 plummeted nearly 5% intraday, ultimately closing down 2.4%. Since reaching a new high at the end of October, the retracement has expanded to 7.9%. Overnight, the market erased $2 trillion in market value. Nvidia initially surged over 5%, then reversed to close lower, becoming the most damaging “executioner.”

The Eastern markets were not spared. The Hang Seng Index fell 2.3%, and the Shanghai Composite broke below 3,900 points, with a decline close to 2%.

But the most astonishing data came from the crypto market. Bitcoin broke below the psychological level of $90,000, and Ethereum also failed to hold $2,800. Within 24 hours, over 245,000 traders were forcibly liquidated, with a total liquidation amount reaching $930 million. Since the high at the beginning of the year, Bitcoin has retraced all of its 2025 gains, with a decline of 9%.

Even gold, often seen as a “safe haven,” was not immune, falling 0.5%, hovering around $4,000 per ounce.

The Root Cause: The Federal Reserve Is That Invisible Hand

Over the past two months, the market has been immersed in the daydream of “rate cuts in December.” But a single turn by the Federal Reserve disrupted all the chips.

Recently, Fed officials collectively turned hawkish. Inflation is slowly declining, and the labor market remains resilient. Several policymakers unusually hinted that “further tightening cannot be ruled out if necessary.” The underlying message is clear: No rate cuts in December.

CME’s FedWatch data vividly records the market’s collapse speed. A month ago, the probability of rate cuts was as high as 93.7%, but in just 30 days, it dropped to 42.9%. The shattered expectations caused the entire market to go from celebration to freezing cold.

Catalysts Turned Decelerators: NVIDIA’s “Perfect” Paradox

After the rate cut expectations dissipated, the market hoped Nvidia’s Q3 earnings beat expectations could reverse the trend. But “perfect” is— it didn’t.

Nvidia’s stock price first rose then fell, which itself is the biggest negative signal. In the era of high-tech valuations, good news can no longer push stock prices higher; instead, it signals large capital fleeing.

Famous short-seller Burry further added fuel to the fire, continuing to short Nvidia and questioning the entire AI industry’s “cyclical financing game”—the hundreds of millions of dollars flowing between Nvidia, OpenAI, Microsoft, Oracle, and others. He bluntly stated: The actual end-user demand is laughably small; 90% of customer funds come from distributors. These comments stirred waves at a time when market sentiment was most fragile.

Nine Major Killers: Why Can’t the Downtrend Stop

Goldman Sachs’ trading team summarized nine key drivers behind this decline:

1. Bullish momentum has exhausted — No reaction to real positive news indicates the market has already priced in good news in advance.

2. Private credit risk intensifies — Fed Governor Lisa Cook publicly warned that private credit assets are fragile and linked to the complex financial system, with overnight credit spreads widening instantly.

3. Employment data is hard to interpret — Although September non-farm payrolls were strong, they provided limited guidance for December rate decisions and failed to soothe market concerns about future rates.

4. Crypto leads the way downward — Bitcoin first broke below $90,000, leading the stock market lower, with risk sentiment originating from high-risk sectors.

5. CTA strategies accelerate selling — Commodity Trading Advisor funds were previously extremely bullish; after breaking technical levels, systematic selling was triggered, intensifying the sell-off.

6. Short sellers regain activity — The reversal in market momentum gave shorts a breather, and short positions re-emerged.

7. Overseas tech stocks weaken — Key Asian tech stocks like SK Hynix and SoftBank performed poorly, unable to provide external support to US stocks.

8. Liquidity suddenly dries up — The liquidity of top bid-ask spreads in the S&P 500 deteriorated significantly, well below the year’s average, greatly reducing the market’s ability to absorb sell orders.

9. Passive funds dominate trading — ETF trading volume as a proportion of total market surged, indicating that trading is driven more by macro perspectives and passive capital rather than individual stock fundamentals.

Is the Bull Market Over, or Is Volatility Restarting?

Bridgewater founder Ray Dalio’s recent views are quite insightful. He believes that although AI-driven investments have pushed the market into a bubble stage, investors need not rush to exit. The current market is roughly at 80% of the peak of the historical bubble, still some distance from the actual top.

His conclusion: many assets may continue to rise before the bubble bursts.

Combining current data, we see that the November 21st crash is not a “black swan” shock but a collective stampede after highly anticipated events, exposing structural market vulnerabilities:

Global market liquidity is extremely fragile. Currently, “tech + AI” has become a narrow bridge for global capital; any small shift could trigger a chain reaction. Increasingly, quantitative trading strategies, ETFs, and passive funds support market liquidity, altering market structure. The more automated trading strategies there are, the easier it is to form a one-sided stampede.

Cryptocurrencies have become the temperature gauge for global risk assets. This decline was led by Bitcoin, marking the first time cryptocurrencies truly entered the global asset pricing chain. BTC and ETH are no longer fringe assets but front-line indicators of global risk sentiment.

Fundamentally, this is a structural crash, not the beginning of a bear market. The market is entering a high-volatility phase, requiring time to recalibrate “growth + interest rate” expectations. The AI investment cycle will not end immediately, but the era of “mindless rally” is over. Future markets will shift from expectation-driven to actual realized returns.

As the earliest to decline, with the highest leverage and weakest liquidity, cryptocurrencies are experiencing the most intense volatility, but rebounds often appear first.