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|7 min ReadExtreme Fear Slams Crypto As Stocks Shed Trillions
Jax Morales
Senior Analyst
Published
Jan 16, 2026
Risk assets just went through a serious shock. A sharp sell-off in United States stocks wiped out trillions in market value, flipped sentiment to “extreme fear,” and dragged Bitcoin back to levels not seen since April. Crypto did not cause this move. It reacted to a big reset in macro expectations and liquidity, and the reaction was fast.
Stocks Slide, Nvidia Reverses, Crypto Hits Extreme Fear
The session started with hope. The S&P 500 opened firm, then turned sharply lower and finished the day down nearly 4 percent. Nvidia, which had just delivered a stellar earnings report, flipped from a strong rally to a loss of more than 8 percent.
Across the S&P 500, the selling was broad. The index saw a market-cap wipeout of more than 2.7 trillion dollars, according to Bloomberg reporting. By comparison, the entire crypto market is a little above 3 trillion dollars after falling about 7 percent on the day. That puts the scale of the equity move in perspective.
Despite the damage, the S&P 500 still trades less than 6 percent below its recent peak near 6,920. Prices are not yet in full-on crisis territory, but sentiment is. Measures of risk appetite for both United States equities and crypto dropped into “extreme fear.”
Bitcoin extended losses from last week and revisited the 85,000 dollar level for the first time since April, based on CoinGecko data. Liquidations across the crypto market surged to 829 million dollars, according to CoinGlass, as leveraged positions were forced out and long traders were swept away.
Jobs Data, Credit Spreads And Volatility Mechanics
Analysts are not pointing to a single headline as the trigger. The Kobeissi Letter highlighted the Bureau of Labor Statistics’ November jobs report, due on December 16, in a Thursday tweet, noting that the headline explanation “was, AT BEST, partially to blame.” In their view, the sell-off looked more like a mechanical move and a sign of shifting market dynamics than a clean reaction to one data point.
Behind the move sits a cocktail of macro fears and technical forces. Some commentators talk about an AI bubble. Others point to options expiry. But several experts are focused on deeper factors.
Peter Chung, head of research at Presto Research, told Decrypt that the “looming risk in private credit risk highlighted by Fed Governor Lisa Cook last night” is still under-discussed. Private credit sits at the intersection of leverage, opacity, and funding costs. If that market wobbles, it can quickly spill into broader risk assets.
Singapore-based crypto trading firm QCP Capital framed the backdrop as late-cycle behavior, not the start of a recession. In a Wednesday note, they pointed to the broad-based correction across equities, gold, and crypto as textbook late-cycle action. Bitcoin’s price action fits that pattern. It is trading roughly flat over the past 24 hours around 91,750 dollars, trying to recover after a brief dip below 90,000. Thin liquidity and persistent spot selling have amplified every move.
Fed expectations are shifting at the same time. “The possibility of a December rate cut has faded as Fed officials remain divided and cautious,” Jay Jo, senior research analyst at Tiger Research, told Decrypt. Strong jobs data and Lisa Cook’s comments “raised macroeconomic risk, pushing markets into a short-term correction.”
A key part of this story is United States credit spreads. Simply put, the spread is the gap between yields on corporate bonds and yields on United States Treasuries. When the spread widens, it signals higher perceived risk of corporate default and greater economic uncertainty. Investors often treat widening spreads as an early warning for downturn risk.
“United States credit spreads have widened slightly but remain moderate, with limited systemic stress,” Tim Sun, senior researcher at HashKey Group, told Decrypt. In other words, the system is feeling pressure, but it is not yet flashing full-blown crisis signals.
Sun argued that “yesterday’s decline had little to do with specific news catalysts. Fear was transmitted mainly through sentiment and liquidity dynamics.” Many investors had bought put options as hedges ahead of Nvidia earnings and the nonfarm payrolls release. Once those events passed and uncertainty dropped, implied volatility collapsed. That volatility crush forced market makers to unwind hedges by selling long positions. That selling helped trigger the initial drop. After that, trend-following strategies kicked in and amplified the move as key technical levels gave way.
Bitcoin ETF Flows Stabilize As Fed Odds Reprice
The ETF tape tells a slightly different story. United States spot Bitcoin ETFs just broke a five-day outflow streak, recording 75.47 million dollars in net inflows on November 19. It is a small number in absolute terms, but it is a sign that some buyers are stepping back in after a period of heavy selling.
BlackRock’s IBIT led the rebound with 60.61 million dollars in inflows, a sharp contrast to Tuesday’s record 523.15 million dollar outflow, according to SoSoValue data. Grayscale’s Bitcoin product followed with 53.84 million dollars of inflows. On paper, these flows mark a potential shift in sentiment away from pure pessimism.
At the same time, experts warn that the tone of ETF buying looks more defensive than euphoric. Investors may be rebalancing and averaging in, not charging into a new bull leg. The macro backdrop has not improved enough to support a strong, sustained rally.
Rate expectations sit at the center of that backdrop. The odds of a December rate cut have fallen sharply. A month ago, markets treated a cut as almost a sure thing. Now the CME FedWatch tool puts the probability at about 35 percent. That repricing alone is enough to shake leverage, structured products, and high-beta trades across equities and crypto.
“If the private credit risk indeed becomes a contagion, it may actually tilt the Fed more in favor of the rate cut during the December FOMC meeting,” Presto’s Chung said. In that case, easier policy would likely be positive for all risk assets, including crypto. But that is a scenario, not a done deal.
For now, HashKey’s Sun sees the move as “a repricing of macro expectations that triggered position adjustments rather than a fundamental collapse.” If upcoming economic data justify a rate cut, the outlook could brighten. To get strong, sustained upside though, the market will still need additional macro tailwinds.
Choppy Trading Ahead As Uncertainty Piles Up
Given the current environment, most experts are not calling for a clean directional trend. Instead, they see an extended stretch of choppy markets into year-end as investors rebalance portfolios and adjust to new rate expectations.
“Most investors are dealing with too many unknowns all at once,” Lawrence Samantha, CEO of crypto asset management platform NOBI, told Decrypt. When uncertainty piles up, both retail and institutional players tend to reduce risk quickly. Automatic trading systems start selling too, which pushes fear even higher and reinforces the cycle.
The result is a market that feels late-cycle. Sentiment is fragile. Credit spreads are edging wider. Fed expectations are moving fast. ETF flows are stabilizing but not roaring. And crypto, sitting at the heart of the global risk complex, is trading like what it has become: a high-beta expression of macro stress and relief, not a perfect hedge against it.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.