The Collapse of Global Markets: A Complete Analysis of What Really Happened

Wednesday, November 21 marked a black day in global financial markets. It was not an isolated decline in a single segment but a systemic correction involving all risk assets simultaneously: stocks, cryptocurrencies, and even gold. Bitcoin reached $90.61K ( with a negative change of -0.38% in 24 hours ), while Ethereum fell to $3.11K ( -0.08% in 24 hours ). In the US stock market, the Nasdaq 100 experienced a nearly 5% drop from its intraday high, closing down 2.4%. This decline erased years of gains in just a few hours.

The scope of the collapse in major indices

The downturn was not limited to Wall Street. The Hong Kong Hang Seng Index lost 2.3%, while the Shanghai Composite dropped below 3900 points with a nearly 2% loss. In the tech sector, NVIDIA experienced a surprising reversal: despite Q3 earnings surpassing expectations, the stock closed in the red after a brief initial rally. This lack of positive reaction was interpreted by the market as a warning signal rather than a sign of strength.

In the cryptocurrency sector, the situation was even more critical. Over 245,000 traders were liquidated in the 24 hours following the market crash, with total losses of $930 millions. Bitcoin, which had hit $126,000 in October, not only wiped out all gains of the current year but also plunged below $90,000 at one point, recording an overall decline of 9% since the start of the year. Surprisingly, even gold, traditionally considered a safe haven during turbulence, gave ground, falling 0.5% and oscillating around $4,000 per ounce.

Who triggered the market crash?

The main responsibility lies with the Federal Reserve and its change in communication tone. Over the past two months, market participants obsessively repeated one hope: rate cuts in December. Suddenly, however, several Fed officials adopted a surprisingly hawkish tone. The messages received by the market were clear: inflation is falling slowly, the labor market remains resilient, and “further tightening is not excluded if necessary.” In other words, the rate cut the market was expecting has been canceled.

CME FedWatch tool data perfectly captured this reversal: one month prior, the probability of a cut in December was 93.7%, but it plummeted to 42.9%. This sharp drop in expectations transformed the atmosphere from euphoria to collective panic.

Nine factors that worsened the downward spiral

According to Goldman Sachs trading team analysis, the market crash was fueled by a convergence of factors:

Exhaustion of NVIDIA’s rally: Although quarterly results were solid, the market had already fully priced in these positive expectations. As Goldman notes: “When positive news does not generate bullish reactions, it is the strongest bearish signal.” The well-known short seller Michael Burry raised doubts about the sustainability of the financing model among NVIDIA, OpenAI, Microsoft, Oracle, and other AI sector companies, stating that actual end demand is unusually low.

Fragility of liquidity in private credit markets: Lisa Cook of the Federal Reserve warned about valuation vulnerabilities in the private credit sector. The complex interconnection of this segment with the global financial system represents an underestimated risk.

Ambiguous employment data: The September non-farm payroll report did not provide enough clarity to guide Fed decisions, leaving concerns about future interest rates unresolved.

Transmission of sentiment from riskier assets: Bitcoin’s collapse preceded the stock market decline, suggesting that cryptocurrencies have become the first indicator of global risk sentiment.

Acceleration of CTA fund liquidations: Commodity Trading Advisors, holding extreme long positions, systematically triggered automatic sell-offs once critical technical levels were exceeded, creating a downward spiral.

Reactivation of short sellers: The trend reversal provided opportunities for bears, who resumed pressing on prices.

Weakness of Asian stock markets: Companies like SK Hynix and SoftBank did not provide positive support for the US market.

Liquidity drain: Bid-ask spreads of major S&P 500 stocks widened significantly below the annual average. This “zero liquidity” phenomenon makes the market fragile to even modest sell orders.

Dominance of macro-driven trading: The volume of ETFs as a percentage of total trading reached historic levels, indicating that prices are increasingly driven by passive strategies and macroeconomic outlooks rather than individual company fundamentals.

Market structure amplified the collapse

A critical underestimated aspect is that the market crash was worsened by increased automation in trading. Passive funds, ETFs, and quantitative trading strategies have become so dominant that any initial movement quickly turns into a “one-way flight.” The “Tech + AI” sector was particularly crowded with global capital, making the system extremely sensitive to any change in sentiment.

An intriguing detail is that Bitcoin and Ethereum are no longer marginal assets. For the first time in history, cryptocurrencies act as true indicators of the price of risky assets globally, heating up traditional markets with their panic signals.

Has a bear market truly begun?

Ray Dalio, founder of Bridgewater Associates, offered a reassuring perspective. According to him, despite the real bubble in AI investments, investors should not rush to liquidate positions. He believes the US stock market is currently at about 80% of the bubble peaks of 1999 and 1929. “Before a bubble bursts, many things can still go higher,” Dalio emphasized.

Based on this analysis, the November 21 crash does not represent the start of a true bear market but rather the beginning of a high-volatility phase where the market would recalibrate expectations on growth and interest rates. The AI investment cycle will not end abruptly, but the era of “irrational rallies” is over. The market will shift from expectation-driven dynamics to profit realization.

Cryptocurrencies, being the most volatile asset with the highest leverage and most fragile liquidity, experienced the most pronounced collapse. However, historically, these same areas tend to bounce back first when sentiment changes. The market crash of this day is less a systemic catastrophe and more a necessary recalibration of a system that had become too exaggerated.