Here is Why Crypto and Stocks Lost $120B and $1T Respectively

• The Nvidia-inspired market rebound faltered, resulting in the biggest midday reversal for U.S. stocks.
• Bitcoin led the wider crypto market in a selloff, signaling the potential onset of the macro bear market.
• Both crypto and stocks have recorded extreme fear of further capitulation amid midterm macroeconomic uncertainty.

The United States stock market led the crypto industry in heavy losses by erasing $1 trillion in market value, led by the S&P 500 and the NASDAQ indexes. On the other hand, the crypto market wiped out over $120 billion in market capitalization, led by Bitcoin (BTC).

Bloodbath in U.S. Stock Market Trickles Down to Crypto Industry 

The S&P 500 index dropped 1.56% on Thursday to close the day trading at 6,538. The NASDAQ index declined 2.15% on Thursday to close the day trading at around 22,078. 

The U.S. stock market recorded the biggest intraday reversal year-to-date, even after Nvidia reported a record $57 billion in third-quarter revenue. NVIDIA’s stock closed Thursday 3.15% down as the Cboe Volatility Index (VIC) surged 11.6% during the past 24 hours.

Meanwhile, Bitcoin led the wider crypto market in notable losses during the past 24 hours. The total crypto market cap slipped 6.6% to drop below $3 trillion, for the first time in more than seven months, to hover around $2.94 trillion at press time. 

Bitcoin price dropped over 7% during the past 24 hours to hit an intraday low of below $85,000. As such, nearly $1 billion was liquidated from crypto leveraged traders, with over $836 million involving long positions.

Why Did The U.S. Investors Cause Crypto Crash Amid No Negative News?

While there was no major negative news on Thursday, the crypto market experienced a selloff due to: 

Heavy Capitulation of Retail and Whale Traders Amid Bear Market Sentiment

According to a report from 21Shares, the macro liquidity vacuum, following the prolonged U.S. government shutdown, has resulted in heavy capitulation of retail and whale traders. The 21Shares reported that the liquidity situation remains in limbo after the U.S. government shutdown pulled out $150 billion from the system.

After the largest deleveraging event in October, the report noted that long-term investors have offloaded 42K BTC, valued at around $4 billion this month. According to James Butterfill, head of research at CoinShares, the crypto market has suffered from a self-fulfilling prophecy based on the four-year bull cycles.

Furthermore, CoinShares’ Butterfill has noted that large Bitcoin hikers have offloaded more than $20 billion since September.

Extreme Fear of Further Selloff Amid Fed Policy Uncertainty

The crypto market experienced a notable selloff amid extreme fear of further capitulation. According to CoinMarketCap’s Fear and Greed Index, crypto traders have shown the same fear as the March-April fears.

Notably, U.S. investors have been selling hard, as observed in consecutive weekly outflows in the exchange-traded funds (ETFs). The crypto traders have been selling hard as Wall Street’s conviction of a 25 bps Fed rate cut next month fades.

However, the imminent Fed’s Quantitative Easing (QE) after the reopening of the U.S. government has investors hoping for a bull rally ahead.

Related: Will Bitcoin Price Rise Again? Here’s What Industry Experts Are Saying