Extreme Caution Sweeps Markets as Equities and Crypto Dive

A wave of caution swept through markets on Thursday, rattling U.S. stocks and pushing investors away from higher-risk assets. The retreat extended into crypto assets, with Bitcoin falling below $85K and reflecting the overall risk-off sentiment.

Equities and Crypto Hit by Sharp Reversals

The Kobeissi Letter reported on X that U.S. markets experienced their fastest reversal since Liberation Day, with the S&P 500 losing roughly $2 trillion in market value within five hours. The index closed nearly 4% lower, while Nvidia—despite a recent earnings-driven surge—also dropped sharply, finishing more than 8% down.

Wider market signals indicated mounting concern, with the Crypto Fear and Greed Index falling to 14, signaling extreme caution. The move was striking because the S&P 500 remained just 6% below its recent high. Despite relatively modest price declines, investor confidence had eroded quickly, showing how sentiment can sour even when markets hover near their peaks.

Crypto faced its own pressure as liquidations climbed to roughly $829 million. High leverage amplified the decline, pushing Bitcoin down to around $82,000—its lowest level since mid-April—showing how sensitive the market is to sudden moves.

Market Mechanics and Leverage Amplify the Downturn

Giving details on what could have triggered the downturn, analysts at The Kobeissi Letter noted that the only notable update during the session was a headline confirming the release date of the US November jobs report. While the drop accelerated afterward, the analysts suggested the headline was only partially responsible. They viewed the move as largely reflecting internal market dynamics and broader selling pressure rather than a single news event.

Kobeissi also pointed to the elevated use of leverage, particularly within crypto markets. While earlier declines had been concentrated in crypto alone, Thursday’s drop was far more synchronized. With liquidations now approaching $1 billion per day, the effect has become increasingly amplified, intensifying the emotional swings driving market behavior.

Tim Sun, senior researcher at HashKey Group, said the drop did not seem tied to any major news event. He explained that the market’s weakness was driven by shifting sentiment and tighter liquidity. Traders had positioned defensively, buying put options ahead of Nvidia’s earnings and the upcoming US labor data, which amplified selling as the market reacted.

Sun added that “trend-following strategies further amplified the decline as prices subsequently broke through key technical levels.”

Fed Moves and Data to Influence Crypto Markets

Looking ahead, Chung from Presto noted that if strain within the private-credit market begins to spread, it could push the Federal Reserve toward supporting a rate cut at the December Federal Open Market Committee meeting, which would likely improve the outlook for risk-focused assets, with crypto expected to benefit as well. Despite this, expectations for a December rate cut have currently dropped to 35%.

Tim Sun added that a more favorable market tone would depend on whether upcoming economic data supports easing. While a rate cut could help calm markets, he noted that a sustained rebound would still require broader macroeconomic support.

With confidence shaky, many expect uneven trading as investors adjust their positions heading into the final weeks of the year.