The S&P 500 and cryptocurrency markets have collectively lost $5.5 trillion in value over the past two months, with $4.5 trillion erased from the S&P 500 alone since February 20. Kobeissi attributes the plunge to a sudden reversal in risk appetite, noting markets swung from record highs to bearish territory in days.

“Sentiment is the ultimate driver of price in ANY market, regardless of fundamentals,” the X thread states, highlighting that fear-and-greed indices in stocks and crypto hit their lowest levels since 2022.

Source: The Kobeissi Letter on March 10, 2025 via X.

Despite prior awareness of escalating trade tensions, markets rallied to new highs in December 2024 and early February. The downturn began on Feb. 20, coinciding with institutional investors slashing exposure to tech stocks. Hedge funds reduced holdings in “Magnificent 7” equities to a 22-month low ahead of the sell-off, Kobeissi reported.

Cryptocurrencies mirrored the trend, dropping $1 trillion despite bullish policy developments. Institutional investors built a record Ethereum short position Feb. 9, while retail traders piled into crypto amid speculation about a U.S. Bitcoin reserve. “Even the U.S. Bitcoin Reserve became a ‘sell the news’ event,” Kobeissi noted.

Massive outflows exacerbated losses. Crypto funds saw a weekly record $2.6 billion exit in late February, while U.S. small- and mid-cap funds bled $3.5 billion and $2.1 billion, respectively. Technology sector funds lost $1.9 billion in one week.

Kobeissi’s thread warns volatility will intensify, with the VIX surging 70% in a month. Kobeissi predicts 1,000-point daily swings in the Dow Jones Industrial Average could become routine, urging investors to monitor sentiment shifts. “Getting ahead of shifts in sentiment will be the most profitable strategy of 2025,” Kobeissi’s analysis concludes.

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