The US stock market is starting to feel more and more like the 'crypto world': high leverage, emotion-driven moves, rapid liquidation chain reactions, and narrative-driven speculation (AI is currently the biggest 'narrative'). Within just 27 minutes of the US market opening, the Nasdaq 100 index plunged nearly 1,000 points, and the S&P 500 wiped out $1 trillion in market value. Two pieces of news combined with excessive market leverage caused panic to spread rapidly. What’s worth noting is the leverage explosion. The 3x Nasdaq ETF and 3x Semiconductor ETF have hit record fund sizes, and the same goes for leveraged ETFs in Asia (especially in South Korea and Taiwan). Unlike previous events like the pandemic circuit breakers, this time, price breakdowns triggered chain liquidations, making it increasingly similar to perpetual contract liquidations in the crypto world. Honestly, this wasn’t even triggered by particularly big news. The main factors were Apple raising prices (due to rising chip costs) + slightly higher-than-expected inflation data. Yet in just 27 minutes, $1 trillion evaporated. This isn’t much different from how the crypto market can swing over 10% because of some news (sometimes even fake news). The market’s sentiment around the AI narrative is extremely polarized. On one hand, there’s FOMO over the massive potential gains from AI, but on the other hand, there’s fear of an overblown bubble. The current AI narrative has some parallels to the early days of the 'altcoin' frenzy in the crypto world (though, to be fair, some AI demand is very real, and the stock market has institutional rebalancing and other supports—this is more about price volatility). Background info: At 8:30 AM Eastern Time, the U.S. released its PCE inflation data (the Fed’s most closely watched inflation metric), which came in at 4.1%, higher than expected and the highest since April 2023. At this point, the market was still calm. But shortly after, Apple announced price hikes: Mac and iPad prices are going up by as much as 25% due to high chip costs, leaving them no choice (Apple’s market cap instantly dropped by about $220 billion). This news became the spark. If Apple is raising prices due to AI-related costs, what about other tech companies? Is there a bigger economic problem? Will the Fed raise rates? This kind of thinking easily leads to a stampede. The reason for the rapid drop is the excessive leverage in the market: a large number of people are using 3x leverage to buy Nasdaq ETFs and Semiconductor ETFs, and leveraged ETF funds for AI concept stocks in Asia have also surged. Once prices break key levels, stop-loss orders and liquidations trigger a chain reaction. This kind of scenario is all too common in the crypto world.