Key insights:
- The crypto market dropped fast during the November crash as stocks and crypto moved together again.
- A stablecoin pricing error and high leverage might have turned a normal dip into a sharp fall.
- Gold gained strength while whales sold into weakness, showing a shift in how money moves during fear.
The crypto market fell sharply this week as both global stocks and major coins dropped at the same time. The US stock market lost almost $1 trillion in value in one day.
The crypto prices market cap lost about $120 billion. Bitcoin price fell around 7%, and Ethereum also dropped around 7%.
This sudden fall looked very different from normal dips. It was fast and felt manipulated. It pushed many traders to ask if the crypto prices are facing a deeper issue that people have not noticed.
Stocks and the Crypto Market Fall Together as Correlation Rises
The first big change is the link between the crypto market and the US stock market. A correlation is a number that shows how two things move compared to each other.
A number close to one means they move the same way. A number close to zero means they move randomly, and a reading below zero means they move in opposite directions.
In September, Bitcoin and US stocks were moving in different ways. The correlation was below zero. But now the number has jumped to around 0.78.
This means both markets are moving almost the same way again. When stocks fell this week, Bitcoin price also fell quickly.
This also pulled the rest of the crypto market lower.
Another change is the link between Bitcoin and gold. For many months, gold and Bitcoin were rising together when the world was nervous.
But the link is now below zero. Negative, to be precise.
This means gold is rising when Bitcoin is falling. Gold is acting as a safe asset again, forcing investors to shift their focus.
Meanwhile, this shift shows that during fear periods, users are choosing gold over crypto. So, is the market perspective turning “risk-off”?
What May Have Started the Crypto Market Drop?
There are a few key signs that show why the crypto market may have corrected so quickly.
The first one is a stablecoin pricing issue. A stablecoin is a token that tries to stay at one dollar.
On some platforms, the crypto prices slipped below $1 for a short time because of a software mistake. Even a small error can confuse trading systems.
Many trading bots then react together. This can cause sudden selling.
This same kind of mistake also happened on October 10. That day saw one of the biggest liquidations in crypto market history.
Liquidation happens when a trader who uses borrowed money loses too much. The system then closes its position. This adds more selling and pushes the crypto prices lower.
The new mistake this week restarted that same pattern. It created a chain reaction that spread across Bitcoin, Ethereum, and other large tokens.
And that reaction, per Tom Lee, Fundstrat’s analyst, might be in its last leg. Another major point is the type of selling seen in the market.
Some early reports said retail users were selling their spot Bitcoin and Ethereum exchange-traded funds. But later data showed that large wallets were the main sellers.
These wallets hold bigger amounts. When they sell, the price falls faster.
Spot ETFs also saw outflows. This suggests that big investors were reducing their exposure during the fall.
Leverage made the drop even sharper. Leverage means trading with borrowed money.
When the market moves the wrong way, leveraged traders get liquidated quickly. Galaxy’s latest report shows leverage in the crypto market is at a new all-time high of $73.6 billion.
But this time, most of the borrowing is backed by Bitcoin and Ethereum. In earlier years, risky altcoins backed most loans. Today, it is cleaner and easier to track.
Still, when the crypto market drops, these positions close at the same time. This makes the crypto prices fall look mechanical.
What’s Next as Risk Continues to Hover?
As seen, the crypto market still reacts strongly to sudden shocks. The market has better transparency now, but stress events still hit the system hard.
Moreover, gold is gaining strength as a safe place for money. This suggests that during fear, users may cut their crypto prices exposure first.
All these signals show that the crypto market is facing a mix of problems at the same time. Stocks are falling, gold is rising, leverage is high, and stablecoin systems are still weak.
When these factors combine, even a small error can lead to a bigger fall. The November drop shows how sensitive the market still is.