Recently, the sell-off in the storage chip sector of the US stock market can no longer be described simply as a "pullback." Last night, former chip star stocks like SK Hynix, Micron, and SanDisk continued to fall collectively. The Philadelphia Semiconductor Index (SOX) has dropped from over 14,600 points a month ago to currently over 10,400 points.
Now, all investors are asking the same question: how much further will storage chips fall? Is the "All in AI" narrative still viable?
BIT Securities will analyze and answer this biggest doubt in the current market.
1. Technical Bear Market Confirmed
A technical bear market is a concept defined purely by the price decline: when an index or asset drops 20% or more from a recent significant high, it is said to have entered a technical bear market. It does not involve any fundamental judgments and only recognizes price.
Applying this to the Philadelphia Semiconductor Index (SOX), we can calculate the following numbers:
On June 22, SOX reached a record closing high of 14,634.72 points.
The bear market threshold is: 14,634.72 × 80% = 11,707.78 points.
On July 17, SOX closed at 11,673.89 points, officially breaking the threshold and confirming entry into a technical bear market. Since then, the index has continued to decline and has now reached 10,447.49 points, moving further away from the threshold.
What does this number mean? It means that the narrative of "All in AI, buying semiconductors with eyes closed" has at least temporarily failed. The market is no longer a simple logic of "buy on dips," but has entered a phase that requires a reassessment of risks.
2. A Bear Market Tells You How Much It Has Fallen, But Not How Much Longer It Will Fall
First, it must be clarified that a technical bear market is a "statement of fact," not a "predictive tool."
It tells you that the index has fallen over 20%, but it cannot answer whether it will continue to fall or what the bottom will be. Historically, some technical bear markets mark the onset of V-shaped rebounds, while others signal the start of deep bear markets. What distinguishes them? The core pivot is whether the selling pressure has cleared.
The origin of the current selling pressure in storage chips is almost universally recognized in the market — the Korean stock market is undergoing a severe deleveraging, and the storage sector likely needs to wait for this deleveraging to end before stabilizing.
Since the beginning of the year, retail investors in Korea have used margin financing along with single stock leveraged ETFs to aggressively bet on leading stocks like Samsung and SK Hynix. The margin balance surged from 27.4 trillion won at the start of January to a peak of 38.6 trillion won on June 24.
However, the issue with leveraged ETFs lies in their mechanism: "Increase in holdings when prices rise and decrease in holdings when prices fall" mandates a forced rebalance. During an upward cycle, it acts as an amplifier, but once the market reverses, it becomes a meat grinder — falling prices trigger margin calls, and inability to meet margin requirements leads to forced liquidations, creating further downward pressure. This is a typical negative feedback spiral, once set in motion, it is unaffected by human will.
3. When Will Deleveraging End? Keep an Eye on Three Signals
This is the real core issue. Investors should pay attention to the following three observable indicators:
Signal One: Margin Financing Balance. Peak of 38.6 trillion won (June 24) → Dropped to 32.7 trillion won by July 23, but the decline is far from sufficient. This indicator needs to show that it has stopped declining and stabilized clearly to indicate that the margin clearing process is nearing its end.
Signal Two: Forced Liquidation Amount. Approximately 550.8 billion won in March → Soared to 1.12 trillion won in June → Dropped to 473.6 billion won in the first half of July. This is the most intuitive "hemorrhage" from deleveraging and needs to continuously fall back to normal levels—say below several hundred billion won per month to be considered a stop to the bleeding.
Signal Three: Volatility VKOSPI. This is the "fear index" of the Korean stock market, calculated from the option prices of the KOSPI 200 index, measuring the market's expectation of extreme volatility over the next 30 days. During this round of panic, it soared to five times the VIX and has remained high at 85.66 currently. It only indicates that the "fear premium" embedded in market pricing has been eradicated when it retreats to normal ranges.
4. Final Conclusion: The Process Is Not Complete, But Mid to Late Stage Characteristics Are Visible
From the latest market observation, this wave of deleveraging has clearly not concluded.
The KOSPI has triggered circuit breakers nine times this year, alternating between explosive upswings and downswings — this is precisely a typical characteristic of the mid to late stage of deleveraging: the peak of panic selling has passed, selling pressure is starting to weaken, but the market structure has not stabilized, and it will swing violently with any slight disturbance.
To summarize the above viewpoints:
First, the SOX has fallen below the 11,707.78 point threshold, confirming the technical bear market, and the mindless narrative of "All in AI" has ended.
Second, the underlying drive of this decline is the forced clearing of leveraged funds in Korea; the bottom does not depend on how low prices fall, but on how far leverage has been cleared.
Third, to observe the clearing process, focus on three signals: the stabilization of the margin financing balance, the return of forced liquidation amounts to normal levels, and the VKOSPI retreating to normal ranges. Based on the frequency of circuit breakers and forced liquidation data, we are currently in the mid to late stages of deleveraging—the most panicked phase may have passed, but the phrase "structure is not stable" means that bottom-fishing at this time is still a left-side trade.
For market participants, what is truly useful at this stage is not to predict the bottom level, but to establish a set of "signal confirmation" discipline: before the signals stabilize, control positions and leverage; after signals are confirmed, then discuss positioning.
In response to the complex market environment,BIT Securities has launched margin trading and options services, providing traders with multidimensional risk management and capital enhancement paths: using margin buying can improve capital utilization during significant market pullbacks to participate in structural rebounds; using margin selling can establish short positions targeting assets directly impacted by price wars and under pressure from fundamentals, hedging downside risks of holdings. Traders can also buy put options (Long Put) to build a protective net for overall holdings against sudden macro negative news and liquidity shocks; or buy call options (Long Call) to participate in the elastic returns of high beta assets at a limited and fixed cost.
Risk Warning
Historical data does not represent future performance. This article is for market observation only and does not constitute investment advice. Please make independent judgments based on your own risk tolerance.
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