Stocks Plummet More Than Cryptos: Where Did the Money Go?

Bitcoin didn’t receive any money; it just took the beating early.

Written by: Cathy

On July 28 and 29, Seoul. The Kospi index triggered a circuit breaker for two consecutive days, an unprecedented event in the history of the South Korean stock market.

On the first day, it dropped by 10.84%, and on the second day, it fell another 5.98%. The largest weighted stock, SK Hynix, lost about 23% over the two days. The Nasdaq plummeted, and global semiconductor stocks collectively collapsed, with leveraged ETFs falling like dominoes.

After two days, the Kospi's pullback from its June peak widened to 40%, and July was on track to become the worst month on record for this index.

All the previously crowded trades were overturned as if by the same hand.

This is not just bad news for a single stock; it is a global forced deleveraging. The most counterintuitive aspect is that this time, it is stocks that are falling in a manner reminiscent of the crypto market.

01 The Misery Ranking

First, let’s look at the spot market. SK Hynix reported an operating profit of 60.54 trillion won in the second quarter, a record high, but because it fell short of LSEG's estimate of 64.22 trillion, it faced devastating sell-offs, closing at 140.1 thousand won on July 29.

Good news that doesn’t lead to a rise is the biggest bad news. Just recently listed on Nasdaq, its stock price even fell below the issuance price of $149.

Even worse is the derivatives market. The double-leveraged SK Hynix ETF (07709.HK) from Southern Eastern dropped from a peak of 193.65 HKD on June 25 to 32.7 HKD on July 29, a decline of 83%.

This product had a peak size of over 1.3 trillion HKD, claiming to be the largest single-stock leveraged ETF in the world. A month later, over 1 trillion HKD in market value evaporated.

The issuer was forced to amend product rules: starting August 3, its 12 leveraged products will change from a fixed 2x to a flexible leverage of at least 1.1x, determined daily by fund managers. South Korean regulators plan to restrict retail investors from buying leveraged ETFs.

The most surprising scene is that Bitcoin, known for its high volatility, rebounded from a low of $57,800 on July 1 to around $66,300, an increase of nearly 15%.

Stocks have taken on the appearance of the crypto market, while Bitcoin lies by, playing dead and winning.

02 Who Crashed the Market

First, let’s look at a set of data. From the peak on June 22, the S&P 500 only dropped 2.1%, the Nasdaq fell 6.6%, but the Philadelphia Semiconductor Index plummeted 28.6%.

This is not a panic across the entire market; it is a precise demolition: those with the most crowded long positions took the deepest cuts.

The catalysts came from two directions. On one side, SK Hynix's earnings report showed record profits but fell short of expectations.

On the other side is the Chinese variable: Changxin Storage completed the largest IPO in Asia for 2026, raising funds for DRAM expansion, and the narrative of AI memory shortages finally has a competitor.

Tokyo is also applying pressure from behind. The Bank of Japan raised interest rates to 0.75% in December 2025, the highest in thirty years; the ten-year Japanese government bond yield climbed to around 2.9% in July, a high not seen since 1997.

The market estimates a yen carry trade position of $300 billion to $500 billion, hanging like a sword over global risk assets. UBS states that this round of carry trade liquidation has only completed half.

Renowned tech investor Dan Niles believes this is not a collapse of AI logic; it is a “short-term bottom” created by forced liquidations of retail investors and hedge funds. Major brokers are accelerating clean-ups to avoid a repeat of the Archegos collapse.

He even thinks this is just a slowdown in the AI supercycle: the top 1% of companies are conserving computing power, while the remaining 99% are still ramping up.

The industrial logic is not dead; what’s dead is leverage.

03 Bitcoin Didn’t Receive Any Money; It Just Took the Beating Early

So, did the money that ran out of the stock market flow into Bitcoin?

No. Bitcoin’s “resilience” is because it took its beating early.

From May 15 to June 3, U.S. spot Bitcoin ETFs experienced net outflows for 13 consecutive trading days, totaling about $4.4 billion, the longest record in history. During the same period, Bitcoin dropped from around $80,000 to $63,000, a decline of about 21%.

In June, the net outflow was about $4.5 billion, the worst month since the inception of spot Bitcoin ETFs. Nearly 80% of the outflows came from BlackRock's IBIT fund.

The chips that needed to be washed were already cleaned out in June. By the time tech stocks were hit in July, Bitcoin had little left to fall.

What about the inflow in July? From July 14 to 22, there was a net inflow of about $981 million over seven consecutive trading days, the longest and largest inflow since 2026. Leading the way was still IBIT. It was also the fund that led the outflow last month.

It sounds like a lot, but compared to the bloodletting in May and June, it’s just a drop in the bucket. Some analysts have calculated that to fill that hole, several months of continuous buying are needed.

Where did the real safe-haven funds go? Gold. By the end of July, gold prices stood at $4,086 per ounce, up more than 20% year-on-year.

According to CryptoQuant data, the 30-day correlation coefficient between Bitcoin and gold once dropped to -0.88. The last time it was this low was during the depths of the bear market in 2022.

The narrative of “digital gold” has been shredded by empirical data in this round of crisis. Institutions have placed the two in completely different baskets: gold is for survival, while Bitcoin is for speculation. They are no longer competing for the same pool of money.

The path of capital withdrawal is brutally clear: first, it withdrew from high-valuation tech stocks to cash and U.S. Treasuries, then flowed into gold. Bitcoin stands at the far end of the risk curve, and it didn’t even get a chance in the first round of safe-haven buying.

There are also hidden dangers. At the end of June, MicroStrategy announced for the first time a $1.25 billion Bitcoin “monetization” authorization, establishing a formal selling framework for the first time in the company’s history. Once the largest buyer, they are now leaving themselves a backdoor.

04 When Will the Money Really Come?

Three conditions: global liquidity pressure eases; the Federal Reserve cuts interest rates without an economic recession; the CLARITY Act is implemented, eliminating Wall Street's last compliance concerns.

The third condition is the most delicate. This bill passed the House in July 2025 with a high vote of 294 to 134, with 78 Democrats voting in favor, seemingly a smooth path ahead.

However, in July 2026, it got stuck in the Senate, unable to be voted on before the August summer recess. The reason for the deadlock is political: Democrats believe the ethical clauses restricting Trump’s crypto interests are not strict enough, while banking lobby groups oppose the interest-bearing stablecoin provisions.

SEC Chairman Paul Atkins has already stated: if Congress does not pass it, the SEC will create its own rules. This sword still hangs overhead.

However, a direction has emerged. Bitcoin peaked at $126,000 in October 2025 before undergoing a deep correction, and its correlation with the Nasdaq is loosening.

The pricing of tech stocks looks at AI capital expenditures and corporate profits, while Bitcoin’s pricing looks at global liquidity. During easing, they appear to be one family, but when pressure tests come, they diverge.

This low correlation is precisely what institutions desire. BlackRock’s research report suggests that institutional portfolios can allocate 1% to 2% of Bitcoin. Funds scared by single bets on AI will eventually seek assets that do not follow the Nasdaq.

Bitcoin is not a safe haven right now; it is merely a preemptive liquidator with nowhere left to fall.

But when the storm passes and global capital is redistributed, it will be at the front of the line.

The money hasn’t come yet, but the position has already been secured.