Crypto market liquidation wave wipes out 1.2 trillion! Financial expert: Bitcoin not only stable, US stocks may crash

On December 8, Bitcoin was trading near $91,000, having plunged more than 30% from the October high of $126,272. The crypto world has seen devastating losses from 100x leverage, with “Machi Big Brother” Jeffrey Huang being liquidated 71 times since November. Financial expert Nuan Muhua warns that unless Bitcoin stabilizes and rebounds, caution is warranted in the stock market. Although the four major US stock indexes have held the 100-day moving average, there is no guarantee it won’t eventually be breached, just like the 50-day moving average.

$1.2 Trillion Wiped Out in 2 Months: The 100x Leverage Catastrophe in Crypto

Bitcoin had a tough November, with dismal market conditions persisting into December. Nuan Muhua notes that Bitcoin’s price swung from up 30% to down 10% in less than two months. From $125,000 to $82,000, a 34% decline. Such dramatic reversals are not uncommon in crypto history, but happening right after Bitcoin hit all-time highs and market sentiment was at a peak made it particularly destructive.

100x leverage in crypto has already left a trail of devastation, and it’s not just about Bitcoin’s price decline. In leveraged trading, a 1% drop can wipe out a 100x leveraged position. When Bitcoin fell from $125,000 to $82,000—a 34% drop—it meant any long position with more than 3x leverage would be forcibly liquidated. This explains why Jeffrey Huang was liquidated 71 times in November—each time the price rebounded slightly, he went long again, only to be wiped out by another crash.

This chain reaction of liquidations is not unique. According to Coinglass data, crypto market liquidations exceeded $10 billion globally in November, the highest monthly total this year. Many retail investors chased highs with leverage after Bitcoin broke $100,000, only to lose everything in the subsequent crash. This “leverage trap” is a classic feature of late-stage bull markets in crypto—when everyone piles on leverage, the market engineers a massive shakeout.

More worryingly, this crypto crash is not an isolated incident. Nuan Muhua emphasizes that the misery in crypto is spreading to traditional financial markets. All financial assets seem to have suddenly entered a phase of high volatility, and US stocks have started to drop sharply. This cross-market linkage also occurred during the 2022 Luna collapse, but back then the impact on US stocks was limited. Now, as both retail and institutions are heavily involved in both US stocks and crypto, the correlation between the two markets is increasing.

Three Major Features of the Crypto Liquidation Wave

Leverage Abuse: Retail investors chased the rally at highs using 10–100x leverage; a 34% drop wipes out all high-leverage positions

Chain Liquidations: Price drops trigger forced liquidations, which further push down prices, creating a vicious cycle

Celebrity Effect Amplifies Panic: News of liquidations involving high-profile figures like Jeffrey Huang sparks panic selling among retail investors

US Stocks and Crypto Linkage: Systemic Risk in the Retail Market

Nuan Muhua offers a key observation: “When US stocks become a retail market, everyone is a Bitcoin bull.” This phrase reveals a structural shift in today’s financial markets. In the past, US stocks were primarily dominated by institutional investors, with retail making up a small share. But in recent years, zero-commission brokers and social investing communities have greatly boosted retail power in US stocks.

At the same time, these retail investors are no longer only in traditional stocks—they also hold crypto. When Bitcoin surges, the wealth effect encourages retail investors to buy more US stocks, especially tech and AI stocks. Conversely, when Bitcoin crashes, retail investors not only lose heavily in crypto, but may be forced to sell US stocks to cover losses or meet margin calls. This dual exposure has created an unprecedented market linkage.

A recent saying on Wall Street goes: “If you’re a US stock investor, you don’t want Bitcoin to fall.” The implication is that Bitcoin declines will impact US stocks through the wealth effect, leverage liquidations, and contagion of sentiment. When retail investors hold both US stocks and Bitcoin, a crypto crash directly weakens their ability and willingness to hold or add to US stocks.

Data shows this linkage is already emerging. During Bitcoin’s November plunge from its peak, the Nasdaq Index also saw a clear pullback. While not all of this can be attributed to Bitcoin’s drop, the timing overlap is no coincidence. Investors holding crypto-related stocks (like Coinbase, MicroStrategy, Marathon Digital) suffered a double blow: crypto prices fell, and related stocks crashed as well.

100-Day Moving Average: A Key Line of Defense for US Stocks

Nuan Muhua reminds investors that unless Bitcoin stabilizes and rebounds, the stock market should be approached with caution. While the four major US stock indices held their 100-day moving averages on Friday, there is no guarantee they won’t eventually break, as happened with the 50-day moving average. This warning highlights a key technical risk.

Moving averages are among the most basic and important technical indicators. The 50-day MA represents the short-term trend, the 100-day MA the medium-term, and the 200-day MA the long-term. When stock prices fall below the 50-day MA, it’s usually seen as a sign of weakening short-term trend. In November, US stocks already broke below the 50-day MA—an initial warning.

Currently, US stocks are testing the 100-day MA, a key medium-term support. If the 100-day MA is decisively breached, it would trigger a stronger technical sell signal, possibly sparking massive selling by trend followers and quant systems. More concerning, if the 100-day MA fails, the next support is the 200-day MA, implying another possible 10–15% downside.

Nuan Muhua especially stresses the importance of Bitcoin stabilization for US stocks. This view upends traditional thinking. Previously, analysts believed US stocks were mainly driven by economic fundamentals, corporate earnings, and interest rate policy, while crypto was a fringe asset with limited impact on mainstream markets. But now, with heavy retail participation, amplified wealth effects, and widespread leverage, the correlation between Bitcoin and US stocks is at a historic high.

Historically, during the 2022 Luna crash, US stocks also corrected, but mainly due to Fed rate hikes rather than the crypto collapse. This time is different: Bitcoin’s crash is happening with US stocks already highly valued and technically weakening, so their resonance could be even more damaging. In addition, listed companies that hold large amounts of Bitcoin, such as MicroStrategy, now carry significant weight in the US stock indices, and are highly correlated to Bitcoin’s price.

The Cost of Retail’s Leverage Frenzy: Contagion from Crypto to Stocks

Jeffrey Huang’s case is highly representative. As a well-known figure in Taiwan’s entertainment industry and founder of the NFT project Machi X, Huang has a large following in crypto. His trading records on Hyperliquid are fully transparent, and his 71 liquidations in November shocked the market. That’s an average of more than two liquidations per day, and after each one, he quickly opened new positions, only to be wiped out again.

This “lose and reload” behavior is very common in crypto. Many investors enjoy the thrill of leveraged trading in bull markets, thinking they’ve discovered the secret to the markets, only to suffer huge losses when the trend reverses. Huang’s public record of liquidations is a cautionary tale for the dangers of leverage. More importantly, if even well-known figures can’t survive levered trading, the odds for ordinary retail investors are even worse.

The culture of leverage in crypto is spreading to US stocks. Increasingly, retail investors are using margin, options, and leveraged ETFs to amplify their US stock returns. This trend increases short-term volatility and, over the long term, builds up systemic risk. When the market turns, forced liquidations can create a cascading effect, spreading from crypto to stocks and then to the global financial system.

Nuan Muhua’s warning is based precisely on this judgment of systemic risk. He is not simply bearish on US stocks or Bitcoin, but points to the dangerous mutual dependence between the two. In this structure, a collapse in either can trigger a chain reaction. As the most volatile risk asset, Bitcoin’s moves often lead US stocks. Therefore, Bitcoin’s stabilization or rebound will be a key leading indicator of whether US stocks can hold the 100-day moving average.

Investor Strategies: Deleveraging and Diversification

Facing dual risks in crypto and US stocks, how should investors respond? The first principle is to reduce leverage. High leverage is deadly during periods of volatility in both crypto and stocks. Huang’s 71 liquidations prove that even experienced investors can’t survive long-term in a high-leverage environment. Lowering leverage to below 2x, or even fully deleveraging, is the most prudent strategy now.

Next, closely watch Bitcoin’s technical support levels. Nuan Muhua’s call for “stabilization” means Bitcoin needs to establish solid support at a key level, stop falling, and start consolidating. The critical support zone is currently $85,000 to $90,000—if this holds and a base forms, the worst may be over. If $80,000 is breached, a new wave of panic selling could be triggered.

Third, diversify to reduce concentration risk. Don’t bet all your capital on a single market or asset class. Nuan Muhua isn’t telling investors to fully exit US stocks or Bitcoin, but to be aware of their linkage risk. Allocating some funds to gold, bonds, or other traditional hedges can provide a buffer during extreme volatility.

Finally, stay calm and avoid emotional decisions. Panic selling is often the worst timing, just as buying in a frenzy is the most dangerous. As an experienced financial expert, Nuan Muhua’s warning is based on professional risk assessment, not market fearmongering. Investors should rationally assess their risk tolerance, set clear stop-loss plans, and avoid blindly following market sentiment.