## Cryptocurrency Assets Plunge Triggers Chain Reaction, Is a Year-End Rebound in US Stocks Still Possible?

**Bitcoin and US stocks both under pressure, market volatility clearly rising**

On Monday (December 1), the market started poorly, with cryptocurrencies leading the decline. Bitcoin once plummeted over 8%, breaking below $84,000, marking its worst single-day performance since March. Ethereum retreated 10% to around $2,719, and Solana was not spared, falling nearly 10%.

As the crypto market experienced intense volatility, the three major US stock indices also declined collectively. The S&P 500 fell 0.53% to 6,812.63 points, the Nasdaq dropped 0.38% to 23,275.92 points, and the Dow plunged 427.09 points (0.9%) to close at 47,289.33. All three indices ended their previous five-day winning streak, indicating a clear weakening of market sentiment in the first full trading week of December.

### **Leverage Liquidations Trigger Chain Selling, Crypto Market Structure Highlights Fragility**

According to Ben Emons, founder of Fedwatch Advisors, Monday’s sharp decline was mainly caused by a concentrated liquidation event of about $400 million. Exchange leverage ratios reached as high as 200x, forcing some speculative positions to be liquidated.

More concerning is that the open interest in Bitcoin perpetual contracts amounts to as much as $7.87 trillion, while ETF leverage is only about $135 billion. "There is still a large amount of leverage hidden in the system," Emons warned, "Once prices cannot escape the lows, similar liquidations will continue to occur."

Zach Pandl, head of research at Grayscale, pointed out that both on-chain and trading data suggest cryptocurrencies will face ongoing pressure in the short term. The open interest in perpetual contracts is decreasing, and trading volumes on both centralized and decentralized exchanges are noticeably softening, reflecting declining risk appetite and reduced trading activity.

High leverage and low liquidity in the crypto market amplify volatility. This round of declines has produced significant spillover effects among risk assets, becoming a key driver of short-term pressure on tech stocks.

### **Persistent Weakness in Manufacturing, Bond Market Volatility Fuels Market Anxiety**

The latest data from the US Institute for Supply Management (ISM) shows that US manufacturing has contracted for the ninth consecutive month in November, with the PMI dropping from 48.7 to 48.2, well below the expansion-contraction threshold of 50. Ongoing import tariffs are a major factor weighing on factory orders and input prices.

Manufacturers of transportation equipment are even making "more permanent changes," including layoffs and shifting manufacturing overseas. Despite sluggish factory orders, the ISM’s price paid index rose to 58.5, indicating input costs are still rising. Manufacturing employment has contracted for ten consecutive months, with 67% of surveyed companies indicating that managing employee numbers remains normal rather than hiring.

Meanwhile, 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 stated that conditions for raising interest rates are maturing, triggering a synchronized adjustment in global bond markets. Rising US Treasury yields are putting pressure on sectors like real estate and utilities, becoming an important factor weighing on the S&P 500.

### **Fed Rate Cut Expectations Rise, Market Awaits Next Week’s Decision**

The market has priced in about an 88% probability of a rate cut by the Federal Reserve next week. The CME FedWatch tool shows the strongest expectation for a 25 basis point cut. However, Goldman Sachs economists note that internal disagreements within the committee are suppressing more dovish pricing, implying that next week’s move could be a "hawkish cut"—a rate cut combined with signals of a pause in further easing.

Robert Schein, Chief Investment Officer at Blanke Schein Wealth Management, believes the current market environment remains strong, especially considering the high probability of another Fed rate cut. He states that the market is in a "digestive phase," but overall conditions still support stock performance.

### **Mixed Performance in Tech Sector, Profit-Taking in AI Supply Chain**

Performance within the tech sector is showing clear divergence. Broadcom and Super Micro Computer both declined over 2%, indicating profit-taking in previously strong AI supply chain stocks; NVIDIA bucked the trend, rising over 1% to maintain its position as a tech leader; Synopsys surged significantly, benefiting from NVIDIA’s announcement of large investments.

This suggests that the AI sector is entering a phase of structural reevaluation, with capital favoring more certain assets while cautiously handling segments with rapid gains and high valuations.

### **Retail and Consumer Staples Defy Market Trends, Seasonal Factors Provide Support**

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

Adobe Analytics projects consumers will spend $14.2 billion online on "Cyber Monday," providing ongoing support for the retail sector. Despite the overall index weakening, 12 stocks within the S&P 500 hit 52-week highs, with 8 reaching new all-time highs.

This underscores an important signal: **Despite market volatility, internal strength and weakness are accelerating in US stocks**. Automaker General Motors, Monster Beverage, Walmart, and other stocks have broken through long-term highs, indicating that structural strength still exists.

### **Year-End Seasonal Factors May Support Rebound**

Historically, since 1950, December has been the third-best month for the S&P 500, with an average gain of over 1%. Although the market is experiencing short-term turbulence, investors expect the Fed to possibly cut rates next week, while inflation continues to slow. These factors could provide resilient support for year-end gains.

Currently, the market is in a policy wait-and-see phase. Cryptocurrencies, due to their high leverage and low liquidity, are among the fastest sectors to be sold off, but traditional consumer stocks and some leading tech stocks remain resilient. The key to a year-end rebound depends on whether the Fed’s policy stance and corporate earnings stability can work together to support the market.