Crypto asset eagle waterfall triggers a chain reaction! Bitcoin's worst monthly performance approaches March lows, and US stocks are in a state of emergency across the board on Monday.

Bitcoin Faces Worst Sell-Off Since March

The crypto market experienced a sharp correction on Monday (December 1). Bitcoin plunged over 8% intraday, breaking below the $84,000 level, marking the most severe single-day decline since March. Ethereum also declined about 10% to a low of $2,719, and Solana was not spared, with a similar drop. This swift, hawk-like waterfall decline not only impacted the crypto ecosystem but also spilled over into the entire US stock market through risk asset contagion effects.

According to the latest data, Bitcoin is currently priced at 87.62K (up slightly by 0.04% over 24 hours), Ethereum at @E1@2.94K (down 0.84%), and Solana at @E2@122.41 (down 0.90%). Crypto-related listed companies took a heavy hit, with Coinbase and MicroStrategy experiencing particularly sharp declines, reflecting a rapid deterioration in market risk appetite.

Leverage Liquidations Worsen Market Volatility

The core driver of this plunge stems from concentrated liquidation of leveraged positions. Ben Emons, founder of Fedwatch Advisors, disclosed that approximately $400 million in daily liquidations triggered a chain reaction, with some exchanges offering leverage up to 200x. Such extreme leverage magnified price swings significantly.

On-chain data reveal deeper risks: the open interest in perpetual contracts for Bitcoin is about $7.87 trillion, while ETF leverage is only around $135 billion. The hidden leverage within the system remains substantial, indicating that if prices cannot stabilize, similar liquidation storms could continue. The decline in open interest in perpetual contracts, along with weak trading volumes on both centralized and decentralized exchanges, further confirms a cooling of speculative sentiment.

The combination of low liquidity and high leverage in the crypto market amplifies volatility to the extreme, becoming a key short-term pressure point for the tech and growth sectors.

US Stocks Fall Across the Board, Manufacturing Weakness Adds to Woes

The sharp decline in crypto assets triggered a chain reaction in the US stock market. The US equities closed lower across the board on Monday, ending a five-day winning streak. The S&P 500 fell 0.53% to 6,812.63, the Nasdaq declined 0.38% to 23,275.92, and the Dow Jones Industrial Average dropped 427.09 points (0.9%) to 47,289.33.

The economic data backdrop for this decline is equally bleak. The Institute for Supply Management (ISM) reported that manufacturing activity has been below the expansion/contraction threshold for nine consecutive months. The November PMI fell further from 48.7 to 48.2, well below the 50 mark. Weak orders and rising import tariffs continue to squeeze factory profit margins.

Signs of manufacturing recession are becoming more evident. Transportation equipment manufacturers are even openly stating they are making “more permanent changes,” including large-scale layoffs and moving operations overseas. On the employment front, factory employment has contracted for ten consecutive months, with workforce adjustments becoming routine rather than hiring. Despite sluggish orders, the ISM Price Paid index rose to 58.5, indicating input costs are still rising, suggesting ongoing upward pressure on goods inflation.

Rising US Treasury Yields Intensify Market Pressure

Volatility in the US Treasury market further worsened investor sentiment. US Treasury yields rose across the board on Monday, mainly influenced by declines in Japanese and European bond markets. Bank of Japan Governor Ueda Kazuo indicated that conditions for raising interest rates in Japan are maturing, triggering a synchronized adjustment in global bond markets.

Rising yields directly impact sectors like real estate and utilities, which are considered “bond proxies,” becoming a key drag on the S&P 500. This reallocation of capital between stocks and bonds further exacerbates the downward pressure on equities.

Tech Sector Divergence Intensifies, AI Sector Undergoes Structural Reassessment

The tech sector showed clear internal divergence. Broadcom and Super Micro Computer both declined over 2%, reflecting profit-taking after previous gains in parts of the AI supply chain; NVIDIA, however, rose over 1% against the trend, maintaining its leadership position; Synopsys surged significantly after NVIDIA announced substantial investments in it, reinforcing its strategic role in AI chip design software within the industry chain.

This indicates that the AI sector has shifted from a one-sided rally to a structural reassessment. While capital still favors high-confidence assets, there is increasing caution toward segments with rapid gains and high valuations.

Retail Sector Rides the Wave, Holiday Season Becomes Lifeline

Despite overall market pressure, the retail sector performed strongly. As the holiday shopping season kicks into high gear, Home Depot and Walmart both posted gains, and the retail-focused XRT ETF rose nearly 1%, with a five-day increase of over 7%.

Adobe Analytics projects consumers will spend $14.2 billion online on “Cyber Monday,” providing continued momentum for the retail sector. Amid rising macro uncertainties, the industry has become a short-term safe haven for capital.

Notably, despite market volatility, 12 stocks within the S&P 500 hit 52-week highs, with 8 reaching new all-time records. General Motors (GM), Monster Beverage, Walmart, Synchrony Financial, C.H. Robinson, Cummins, ADI, and Steel Dynamics all set either all-time or recent high marks, reinforcing analysts’ view that internal strength and weakness in the US stock market are accelerating, and the market has not fully collapsed.

FOMC Decision Approaching, Year-End Seasonal Factors May Provide Support

Investors are widely focusing on the Federal Reserve’s policy meeting next week. The CME FedWatch tool indicates an 85% probability that the Fed will cut interest rates by 25 basis points in December. Goldman Sachs economists note that internal dissent within the committee is suppressing more dovish pricing, hinting at a possible “hawkish rate cut” next week—meaning a rate cut combined with a signal to pause further easing.

Despite short-term volatility, seasonal factors may continue to play a role. Since 1950, December has been the third-best month for the S&P 500, with an average gain of over 1%. Against the backdrop of a high probability of rate cuts and ongoing inflation slowdown, the year-end rally remains resilient.

Robert Schein, Chief Investment Officer of Blanke Schein Wealth Management, states that the market is currently in a “digestive phase,” but the overall environment still supports stock performance. This suggests that although the hawk-like waterfall decline in Bitcoin caused short-term shocks, longer-term policy and seasonal factors could lay the groundwork for a year-end rebound in US equities.