The US stock market is being "led" by the cryptocurrency circle? Wall Street tycoons reveal: algorithms are using Bitcoin as a barometer.

On Thursday, there was a surprising reversal in sentiment on Wall Street. The AI leader NVIDIA Corporation (NVDA.US) exceeded expectations with its performance, and the strong nonfarm payrolls report for September initially pushed the Nasdaq Composite Index up by over 2%. However, by midday, all gains were erased, and by the close of trading, the tech-heavy index instead fell by over 2%. Multiple factors contributed to this reversal: the historically volatile intraday price movements of NVIDIA Corporation, as well as the complexity of the actual nonfarm data weakening rate cut expectations. However, Tom Lee, head of research at Fundstrat, and Steve Sosnick, Chief Strategist at Interactive Brokers Group, Inc. Class A, pointed out that the volatility in the cryptocurrency market may have been a key factor. "I found this to be a bit eerie. I was on the phone discussing how strong the market performance was and said, 'Bitcoin is about to touch the $90,000 mark; once it breaks through, the S&P Index might follow suit.' It was really unusual - Bitcoin had just broken through $90,000, and the Nasdaq and S&P 500 indices started to decline," Sosnick said. "I wouldn't say Bitcoin was the root cause of the intraday reversal, but it was the direct trigger. Algorithmic traders currently see Bitcoin as a 'leading indicator,' essentially becoming an alternative reference for speculative fervor. Since I and others have noticed this, algorithms naturally capture it. Therefore, funds are being allocated around this signal - whether this allocation is rational or not," he added. The world's largest cryptocurrency, Bitcoin, fell by 6.59% to $86,450.5. The overall cryptocurrency market has experienced a significant downturn recently, with Bitcoin falling over 30% from its all-time high, impacting investors large and small alike. Reports indicate that a large-scale liquidation event on October 10 (forcing the closure of over $19 billion in leveraged cryptocurrency positions) was the direct cause of this decline. "I would like to add to Steve's point. Since encountering negative impacts on October 10, the cryptocurrency market has been struggling. Today's stock market movements are quite similar to the continuation of the cryptocurrency market fluctuations from October 10," Tom Lee of Fundstrat analyzed in an interview on Thursday. Looking back on October 10, Wall Street experienced a major downturn, with the S&P 500 benchmark index falling by 2.7%, and Bitcoin dropping by a whopping 7.2%. "But the scale of the liquidation on October 10 was astonishing... It severely weakened the ability of market makers. Market makers are crucial in the cryptocurrency market because they are the core providers of liquidity, their role is almost equivalent to the 'central bank' in the cryptocurrency field. If there is a gap in their balance sheet and they need to replenish capital, they instinctively shrinks the balance sheet, reduces trading volumes; once prices fall, they also have to further sell assets," explained Lee. "Therefore, the continued weakness in the cryptocurrency market over the past few weeks essentially reflects the impact of impaired market maker capabilities. In 2022, it took 8 weeks to digest this type of risk, and currently we are only in the 6th week. So, I agree with this assessment: due to the ongoing deleveraging process in the current cryptocurrency market and the persistent pressure on liquidity, Bitcoin and Ethereum have to some extent become leading indicators for the stock market," he further added.