Cryptocurrency Market "Divine Eagle Waterfall" Diverges from US Stocks: Complex Market Pattern in the First Week of December

Cryptocurrency Assets Lead the Decline, US Stock Market Adjusts in Response

On Monday, the crypto market experienced a significant pullback, dragging down the tech sector of the US stock market. Bitcoin temporarily dropped over 8%, falling from the previous $90,000 level to below $84,000, marking the worst single-day performance since March. According to the latest market data, Bitcoin’s current price is $92.12K, with a 24-hour decline of -2.45%. Ethereum also faltered, dropping about 10% to a low of $2,719, currently quoted at $3.23K, with a 24-hour increase of +0.12%. Solana faced a similar situation, declining nearly 10%, now at $137.78, with a 24-hour gain of +0.26%.

This “God-Eagle Fall” in crypto assets was primarily triggered by a concentrated liquidation event of approximately $400 million. Ben Emons, founder and CIO of Fedwatch Advisors, revealed that some exchanges have leverage multiples as high as 200x, indicating that hidden risks in the market far exceed surface appearances. The current open interest in Bitcoin perpetual contracts amounts to $787 billion, compared to only about $135 billion in ETF leverage. This suggests that the system is filled with substantial hidden leverage, and if prices cannot stabilize, similar liquidation storms could continue to occur.

US Major Indices All Decline, Market Sentiment Turns Cautious

Affected by the dual pressures of the crypto downturn and rising US Treasury yields, US stocks performed poorly on Monday. The S&P 500 fell 0.53% to 6,812.63 points, the Nasdaq declined 0.38% to 23,275.92 points, and the Dow Jones Industrial Average plunged 427.09 points (a 0.9% drop) to 47,289.33 points. All three indices ended their previous five-day winning streak, indicating that market risk appetite in the first full trading week of December has noticeably weakened.

The widespread rise in US Treasury yields was another key driver. After Bank of Japan Governor Ueda Kazuo signaled a potential rate hike, global bond markets adjusted accordingly. The climb in US Treasury yields put heavy pressure on “bond-like sectors” such as real estate and utilities, further dragging down the overall performance of the S&P 500.

Manufacturing Continues to Weaken, Economic Fundamentals Hit by Tariffs

The US Institute for Supply Management (ISM) November data continued to reveal manufacturing fragility. US manufacturing has been below the growth contraction line for nine consecutive months, with November PMI falling from 48.7 to 48.2, well below the 50 threshold indicating expansion. The report attributes the ongoing import tariffs as the main culprit behind declining factory orders and rising input prices.

Despite weak factory orders, the ISM’s price paid index rose to 58.5, reflecting ongoing increases in input costs. Oren Klachkin, an economist at the National Insurance and Financial Markets, sees this as a sign of persistent upside risks to commodity prices. Employment is even more concerning, with factory employment contracting for the tenth consecutive month. ISM Chair Susan Spence noted that 67% of respondents said managing headcount remains normal rather than hiring.

Manufacturers of transportation equipment are even taking “more permanent measures,” including layoffs and shifting manufacturing overseas. Carl Weinberg, chief economist at High Frequency Economics, bluntly states: “Manufacturing is sick.”

Federal Reserve Policy Expectations and Market Pricing

The market has priced in about an 88% chance of a 25 basis point rate cut by the Federal Reserve next week. However, Goldman Sachs economists point out that internal disagreements within the committee are suppressing more dovish pricing, implying that next week may see a “hawkish rate cut”—a cut accompanied by 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 likelihood of another rate cut by the Fed next week.” He notes that the market is in a “digestive phase,” but the overall backdrop still supports stock performance.

Crypto Market Leverage Amplifies Volatility, Risk Assets Under Pressure

Crypto asset volatility is increasingly correlated with indices like the Nasdaq. Zach Pandl, head of research at Grayscale, pointed out that multiple on-chain and trading data suggest that crypto assets may continue to face pressure in the short term. Open interest in perpetual contracts is declining, indicating a reduction in speculative leverage positions; trading volumes on both centralized and decentralized exchanges remain weak, reflecting decreased risk appetite and slowing trading activity.

The high leverage and low liquidity characteristics of the crypto market amplify volatility, causing spillover effects among risk assets. This has become a key short-term pressure factor on tech stocks. Amid macro policy uncertainty, crypto assets have become one of the fastest sectors to be sold off. Emons emphasizes that Bitcoin’s volatility shows a higher correlation with Nasdaq, and since the crypto market is still retail-driven, its reaction mechanism is more sensitive, further increasing overall market fragility.

Technology Sector Divergence Intensifies, Structural Reassessment of AI Industry Chain

Within the tech sector, performance is mixed. Broadcom and Super Micro Computer both fell over 2%, indicating profit-taking in previously strong AI supply chain stocks; NVIDIA bucked the trend, rising over 1% and maintaining its leadership position in tech; Synopsys surged after NVIDIA announced a large investment in it, reinforcing its strategic role in semiconductor design software within the AI industry chain.

This suggests that the AI sector is not simply rising but is undergoing a structural reassessment. Investors continue favoring high-confidence assets while adopting a cautious stance toward segments with rapid gains and high valuations.

Retail Sector Rises Against the Trend, Holiday Season Provides Support

Despite overall market weakness, the retail sector performed notably well. As the holiday shopping season kicks into full gear, Home Depot and Walmart both rose; the retail-focused XRT ETF increased nearly 1%, with a five-day gain exceeding 7%. Adobe Analytics projects consumers will spend $14.2 billion online on “Cyber Monday,” providing ongoing momentum for the retail sector. Interestingly, during times of macroeconomic uncertainty, the industry has attracted short-term capital inflows.

Internal Divergence Worsens: Distribution of New High and Weak Stocks

Although the indices are broadly weak, 12 stocks within the S&P 500 components hit 52-week highs, with 8 reaching new all-time highs. These stocks include:

General Motors (GM): First time surpassing its historical high since IPO (2010)

Monster Beverage: Highest since its IPO in 1992

Walmart: Highest since its IPO in 1972

Synchrony Financial: First breakout since its IPO in 2014

C.H… Robinson: Highest since its IPO in 1997

Cummins: Highest since its IPO in 1947

Analog Devices (ADI): Record high since 1972

Steel Dynamics: Highest since its IPO in 1996

In contrast, only Copart, a S&P component, hit a 52-week low. Notably, despite the overall index pressure, so many stocks reaching new highs indicates that internal strength and weakness are accelerating, and market rotation and structural strength still persist.

Year-End Seasonal Factors Provide Support, Market Awaits Fed Decision

CME FedWatch tool shows an 85% probability that the Fed will cut rates by 25 basis points at the December policy meeting. Fed Chair Powell will speak after Monday’s close, but given the proximity to the meeting, it is unlikely he will directly address policy stance.

Historically, since 1950, December has been the third-best month for the S&P 500, with an average gain of over 1%. Despite short-term volatility, this seasonal factor may continue to influence investor expectations. Schein states that with a high probability of rate cuts and continued easing, year-end performance remains resilient.

Overall, the current market presents a complex picture of “God-Eagle Fall” crypto declines alongside structural divergence in US stocks. Short-term volatility is increasing, but internal opportunities still exist. Investors should carefully assess risks and timing.