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CRYPTO IS BRINGING US RETAIL INVESTOR’S PAIN TO S&P500

ADMIN || 21st November 2025

A dramatic reversal in US stocks today underscored how Nvidia Corp.’s blowout earnings failed to deliver the “all clear” for risk that traders sought, instead sending them for cover against further losses. An early surge in US stocks at the open evaporated quickly. The S&P 500 Index climbed as much as 1.9% in the first hour before flipping to a 1.1% loss by 1 p.m. the biggest intraday swing since April’s market turmoil wiping out more than $2 trillion in value from the day’s peak and closing below its 100-day moving average for the first time in months. The VIX jumped above 26.

The sharp turn lower came despite Nvidia’s blockbuster earnings report, leaving traders scrambling for explanations. Theories ranged from doubts about the Federal Reserve’s ability to cut rates after a mixed jobs report to concerns over stretched valuations and technical dynamics that may have prompted fast-money funds to keep selling.

Nvidia was the biggest drag on the Nasdaq 100, erasing an early 2.4% gain to drop 3.2% in a rout that wiped out almost $400 billion from its intraday high. Investors shrugged off the company’s stronger-than-expected revenue forecast amid resurfacing worries that spending on AI chips isn’t sustainable.

There was a pickup in shorting across macro products including exchange-traded funds, custom baskets and futures. We also saw poor liquidity, with S&P 500 top-of-book depth slipping below $5 million versus a one-year average of $11.5 million, a factor that may be magnifying stock-market moves.

Since 1957, there have been eight instances, including Thursday’s, in which the S&P 500 opened more than 1% higher only to reverse and close in the red. On the bright side, average performance after those episodes was positive, with a gain of at least 2.3% in the following day and week and a 4.7% advance in the next month.

In our view, what led to today’s capitulation in US equities is mostly the retail investors who were sitting on sharp losses in crypto’s break below the crucial 90k levels. Crypto is suffering from heavy selling by whales who follow the four-year cycle narrative, and this is typically the point in that cycle where prices fall. Large holders have sold than $20 billion since September. The slump has options traders eyeing the $85,000 threshold. Downside protection around that level has received the highest demand, followed by $82,000.

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