What exactly happened during the global stock market crash?

Author: Liam, Deep Tide TechFlow

November 21st, Black Friday.

US stocks plunged, Hong Kong stocks plummeted, A-shares followed suit, Bitcoin once fell below $86,000, and even safe-haven gold continued to decline.

All risky assets seemed to be held down by the same invisible hand, collapsing simultaneously.

This was not a crisis of a single asset, but a systemic, synchronized decline in global markets. What exactly happened?

Global Market Crash: Let's Compare Our Misery! Following "Black Monday," US stocks suffered another major drop. The Nasdaq 100 index plunged nearly 5% from its intraday high, ultimately closing down 2.4%, widening its pullback to 7.9% from its record high on October 29. Nvidia's stock price, which had risen over 5% at one point, turned negative at the close, wiping out $2 trillion in losses overnight. Hong Kong and A-shares across the Pacific were not spared either. The Hang Seng Index fell 2.3%, and the Shanghai Composite Index fell below 3900 points, a drop of nearly 2%. Of course, the worst hit was the cryptocurrency market. Bitcoin fell below $86,000, Ethereum fell below $2800, and over 245,000 people were liquidated, resulting in $930 million in losses within 24 hours. Starting from its October high of $126,000, and even falling below $90,000 at one point, Bitcoin not only erased all its gains since 2025 but also fell 9% from the beginning of the year, triggering a wave of panic in the market. Even more alarming, gold, intended as a hedge against risky assets, couldn't withstand the pressure, falling 0.5% on November 21st and hovering around $4,000 per ounce. Who is the culprit? The Federal Reserve is the prime culprit. For the past two months, the market had been anticipating a December rate cut, but the Fed's sudden shift in stance was like a bucket of cold water poured over all risky assets. In recent speeches, several Fed officials unusually adopted a hawkish stance: inflation is declining slowly, the labor market is resilient, and further tightening is "not ruled out" if necessary. This is tantamount to telling the market: "A December rate cut? Think again." CME's FedWatch tool confirms the speed of the collapse in sentiment: A month ago, the probability of a rate cut was 93.7%, now it has plummeted to 42.9%. This sudden shattering of expectations sent the US stock and crypto markets from a state of shock to one of extreme despair. After the Fed dashed its rate cut expectations, the market's focus shifted to only one company: Nvidia. Nvidia delivered better-than-expected Q3 earnings, which should have ignited tech stocks. However, this "perfect" positive news didn't last long, quickly turning negative and plummeting from its high. Good news failing to drive up prices is the biggest negative factor. Especially in a cycle of overvalued tech stocks, if positive news fails to push up the stock price, it becomes an opportunity to exit. At this point, Burry, the long-time short seller of Nvidia, added fuel to the fire. Burry has published a series of articles questioning the complex multi-billion dollar "circular financing" between Nvidia and AI companies like OpenAI, Microsoft, and Oracle. He stated: "The real end-user demand is ridiculously small; almost all customers are funded by their resellers." Burry has previously warned of an AI bubble multiple times, comparing the AI ​​boom to the dot-com bubble. John Flood, a partner at Goldman Sachs, stated bluntly in a report to clients: "A single catalyst is insufficient to explain this dramatic reversal." He believes that market sentiment is currently battered, and investors have fully entered a profit-protection mode, focusing excessively on hedging risks. Goldman Sachs' trading team summarized nine factors contributing to the current decline in US stocks: Nvidia's positive news has been fully priced in. Despite better-than-expected Q3 earnings, Nvidia's stock price failed to maintain its upward trend. Goldman Sachs commented, "The failure to capitalize on truly good news is usually a bad sign," and the market has already priced in these positive factors. Private Lending Concerns Rise: Federal Reserve Governor Lisa Cook publicly warned of potential asset valuation vulnerabilities in the private lending sector and the risks posed by its complex connections to the financial system, triggering market vigilance and widening overnight credit spreads. The September non-farm payroll report, while solid, lacked sufficient clarity to guide the Federal Reserve's December interest rate decision. The probability of a rate cut only increased slightly, failing to effectively alleviate market concerns about the interest rate outlook. The cryptocurrency crash triggered a broader sell-off in risk assets, even preceding the US stock market crash, suggesting that the transmission of risk sentiment may have originated in high-risk sectors. Commodity Trading Advisors (CTAs) were previously in an extremely bullish state. As the market fell below short-term technical thresholds, systemic selling by CTAs accelerated, exacerbating the selling pressure. The reversal of market momentum provided an opportunity for short sellers, who became active again, pushing stock prices further down. Poor performance in overseas markets and the weak performance of key Asian technology stocks (such as SK Hynix and SoftBank) failed to provide positive external support for US stocks. Market liquidity is drying up. Goldman Sachs data shows that liquidity at the top of the S&P 500 index has deteriorated significantly, falling well below the year-to-date average. This zero-liquidity state makes the market extremely poor at absorbing sell orders, and even small sell-offs can cause significant volatility. Macroeconomic Trading Dominates the Market The surge in the proportion of exchange-traded funds (ETFs) in total market trading volume indicates that market trading is driven more by a macroeconomic perspective and passive funds than by individual stock fundamentals, exacerbating the overall downward momentum. Is the bull market over? To answer this question, let's look at the latest views from Bridgewater Associates founder Ray Dalio on Thursday. He believes that while investments in artificial intelligence (AI) are driving a market bubble, investors shouldn't rush to liquidate their positions. The current market situation isn't entirely similar to the bubble peaks investors witnessed in 1999 and 1929. Instead, according to some indicators he monitors, the US market is currently around 80% of that level. This doesn't mean investors should sell their stocks. "I want to reiterate that many things may still rise before the bubble bursts," Dalio said. In our view, the November 21st drop was not a sudden "black swan" event, but rather a collective run on the market following highly consistent expectations, which also exposed some key issues. The true liquidity of global markets is extremely fragile. Currently, "technology + AI" has become a crowded track for global funds, and any small inflection point can trigger a chain reaction. In particular, the increasing use of quantitative trading strategies, ETFs, and passive funds to support market liquidity is also changing the market structure; the more automated trading strategies become, the easier it is for a "stampede in the same direction" to form. Therefore, in our view, this decline is essentially a "structural crash" caused by excessive automated trading and overcrowding of funds. Furthermore, an interesting phenomenon is that Bitcoin led the decline, 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 of global risk assets and are at the forefront of sentiment. Based on the above analysis, we believe the market has not truly entered a bear market, but rather a phase of high volatility, requiring time to recalibrate expectations regarding "growth + interest rates." The investment cycle for AI won't end immediately, but the era of "mindless price increases" is over. The market will shift from expectation-driven to profit-taking, whether in the US or A-share market. As the risky asset that fell earliest, had the highest leverage, and the lowest liquidity in this downtrend, cryptocurrencies experienced the most severe declines, but they also often rebounded first.