Author: Cathy, Plain Talk Blockchain
July 28 and 29, Seoul. The Kospi index triggered a circuit breaker for two consecutive days, a first in the history of the Korean stock market.
On the first day, it dropped 10.84%, and on the second day, it fell another 5.98%. The stock with the largest weight, SK Hynix, saw a cumulative drop of about 23% over the two days. The Nasdaq plummeted, with global semiconductor stocks collectively collapsing, and leveraged ETFs fell en masse.
As a result, the Kospi's pullback from its June peak widened to 40%, with July on track to become the worst month for this index on record.
All the previously crowded trades were overturned as if by the same hand.
This is not a negative for a specific stock, but a global forced deleveraging. The most paradoxical part is: this time, it’s stocks that are falling most like the “crypto market.”
Misery Ranking
First, let's look at the spot market. SK Hynix's operating profit for the second quarter reached 60.54 trillion won, a historic record, but because it fell short of the LSEG estimate of 64.22 trillion, it faced a devastating sell-off, closing at 140.1 thousand won on July 29.
Good news that doesn’t lead to a price rise is the biggest negative. It just went public splendidly on the Nasdaq, yet its stock price dropped below the issuance price of 149 dollars.
Even worse are the derivatives. The double long SK Hynix ETF (07709.HK) from Southern Eastern and Ying fell from a peak of 193.65 HKD on June 25 to 32.7 HKD on July 29, a decline of 83%.
This product peaked at over 1.3 trillion HKD in size and was touted as the world's largest single stock leveraged ETF. In just one month, over 1 trillion HKD in market value evaporated.
The issuer was forced to modify product rules: Starting August 3, its 12 individual stock leveraged products changed from a fixed 2x to a flexible leverage of at least 1.1x, with the ratio determined daily by fund managers. The Korean regulator plans to limit retail investors from buying leveraged ETFs.
The most unexpected scene is: Bitcoin, known for its high volatility, rebounded from a low of 57,800 dollars on July 1 to around 66,300 dollars, rising nearly 15%.
Stocks have dropped to resemble the crypto market, yet Bitcoin remains passive, lying there to win.
Who is Behind the Crash
Let's look at a set of data. From the peak on June 22, the S&P 500 has only dropped by 2.1%, the Nasdaq by 6.6%, while the Philadelphia Semiconductor Index plummeted by 28.6%.
This is not a panic throughout the market, but a precise point explosion: whoever has the most crowded long positions is being hit hardest.
The catalysts come from two directions. On one side is SK Hynix's financial report, where profits set a record but fell short of expectations.
On the other side are Chinese variables: Changxin Memory completed the largest IPO in Asia in 2026, raising funds for DRAM expansion, with a narrative about AI memory scarcity for the first time facing off against competitors.
Tokyo is also applying pressure from behind. The Bank of Japan raised interest rates to 0.75% in December 2025, the highest in thirty years; the ten-year Japanese bond yield climbed to around 2.9% in July, a high since 1997.
The market estimates that the scale of the yen carry trade is between 300 billion to 500 billion dollars, becoming another sword hanging over global risk assets. UBS claims that this round of carry trades being unwound is only halfway through.
Famous tech investor Dan Niles's judgment is: this is not a collapse of AI logic; it is the “short-term bottom” created by retail investors and hedge funds being forcibly liquidated. Prime brokers are speeding up cleaning up, fearing a repeat of the Archegos blowup.
He even believes this is just a slowdown in the AI supercycle: the top 1% of companies are conserving computing power, while the remaining 99% are still ramping up.
Industry logic hasn’t died; what has died is leverage.
Bitcoin has not received money; it just took its beating early
So, has the money that ran out of the stock market flowed into Bitcoin?
No. Bitcoin’s “resilience” is because it has already taken its hits ahead of time.
From May 15 to June 3, the US spot Bitcoin ETF saw a net outflow for 13 consecutive trading days, totaling about 4.4 billion dollars, a historical record for the longest period. During the same period, Bitcoin fell from around 80,000 dollars to 63,000, a drop of about 21%.
In June, there was a net outflow of about 4.5 billion dollars, the worst single month since the launch of the spot Bitcoin ETF. Nearly 80% of this outflow came from BlackRock's IBIT fund.
The chips that needed to be washed have already been washed out in June. By the time tech stocks were hammered in July, Bitcoin had little left to drop.
What about that influx in July? From July 14 to 22, there was a net inflow of around 981 million dollars over seven consecutive trading days, the longest and largest round of inflows in 2026. Leading this was still IBIT. Interestingly, it was also the one that led the outflow last month.
Sounds like a lot, but compared to the bleeding in May and June, it’s just a drop in the bucket. Some analysts have calculated: to fill that hole, several months of sustained buying are needed.
Where did the real hedging money go? Gold. By the end of July, the gold price stood at 4,086 dollars per ounce, up more than 20% year on year.
According to CryptoQuant data, the 30-day correlation coefficient between Bitcoin and gold once dropped to -0.88. The last time it was this low was during the deepest part of the bear market in 2022.
The narrative of “digital gold” has been shattered by empirical data in this round of crisis. Institutions have placed the two in completely different baskets: gold is for survival, while Bitcoin is for speculation. They are no longer competing for the same pool of money.
The path of funds' withdrawal is brutally clear: first, moving from overvalued tech stocks to cash and US Treasury bonds, then flowing into gold. Bitcoin stands at the far end of the risk curve, hardly part of the first round of hedging.
There are also hidden dangers. At the end of June, MicroStrategy was the first to announce a 1.25 billion dollar “monetization” authorization for Bitcoin, marking the first time in the company's history it established a formal selling framework. The previously largest buyer is starting to leave some leeway for itself.
When will the real money come
Three conditions: a global liquidity crisis alleviation; the Fed lowering interest rates while avoiding an economic recession; the CLARITY Act taking effect to clear the last compliance concerns on Wall Street.
The third condition is the most subtle. This act passed the House in July 2025 with a high vote of 294 to 134, with 78 Democrats voting in favor, making it seem like a smooth path ahead.
However, by July 2026, it got stuck in the Senate and missed the vote before the August summer recess. The reason for the bottleneck is very political: Democrats feel the ethical clauses restricting Trump's crypto interests are still not stringent enough, while banking lobbying groups oppose the interest-bearing provisions for stablecoins.
SEC Chair Paul Atkins has already indicated: If Congress doesn’t pass it, the SEC will make its own rules. This sword still hangs overhead.
However, a direction has emerged. Bitcoin peaked at 126,000 dollars in October 2025 before undergoing a deep adjustment, and its correlation with the Nasdaq is loosening.
Tech stocks' pricing depends on AI capital expenditure and corporate profits, while Bitcoin's pricing depends on global liquidity. When society is in a relaxed state, they seem like one family, but under pressure tests, they take separate paths.
And such low correlation is exactly what institutions desire most. BlackRock's research report suggests that institutional portfolios could allocate 1% to 2% in Bitcoin. Funds spooked by a singular bet on AI will eventually seek assets that do not move in tandem with the Nasdaq.
Bitcoin is not currently a safe haven; it is merely a preemptive cleanout before it has nothing left to fall.
But when the storm passes and global capital is redistributed, it will be at the front of the line.
The money hasn’t arrived yet, but the position has already been secured.
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