It’s not just tariffs. It’s not just crypto. And it’s definitely not just one bad week.
The Kobeissi Letter’s latest commentary highlights exactly what I’ve been warning my students about for months: sentiment is everything. This is a full-scale sentiment shift across global markets, and traders who don’t recognize that are getting caught on the wrong side of the trade.
Over the past month, we’ve seen crypto erase over $1 trillion in market cap, the S&P 500 shed $4.5 trillion, and the Nasdaq plunge into correction territory. Meanwhile, outflows in small-cap, mid-cap, and tech stocks are hitting levels not seen since 2022.
If you’re looking for a single catalyst, you’re missing the bigger picture.
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The Sentiment Crash That No One Saw Coming
Two months ago, bullishness was everywhere.
In December 2024, Apollo Global Management published a report stating there was a 0% chance of a U.S. recession in 2025. Meanwhile, they gave a 90% chance that tariffs were coming—and markets shrugged it off.
Fast forward to March, and that complacency is gone.
Fear & Greed Indices in both stocks and crypto have hit their lowest levels since the 2022 bear market.
Crypto’s sentiment shift is staggering. Just last year, the Fear & Greed Index showed extreme greed levels above 92. Today? It’s sitting at 17—one of the fastest swings in sentiment ever recorded.
The sudden shift in risk appetite has led to a record-breaking exodus of capital across markets.
The Mass Exodus: Record Outflows Across Every Sector
When sentiment flips this fast, liquidity vanishes—and markets don’t just correct, they crash.
In the last week of February, crypto funds saw a record $2.6 billion in outflows, topping the previous record set in 2024 by $500 million.
Last week, small-cap funds recorded $3.5 billion in outflows, the highest since December 18, 2024.
Mid-cap funds saw $2.1 billion in outflows.
Sectoral funds hemorrhaged $4.5 billion, with $1.9 billion coming from tech stocks alone.
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This isn’t just a normal pullback—it’s a complete unwinding of risk.
Crypto’s Collapse: Even Bullish Catalysts Can’t Save It
Bitcoin hitting new highs? Meme coins being ruled not securities? Even the launch of a U.S. Strategic Crypto Reserve?
None of it mattered.
Crypto markets still erased over $1 trillion from their all-time highs despite some of the biggest bullish catalysts in years.
Even Trump launching a meme coin and Gary Gensler resigning—a scenario that would have sent crypto to the moon in 2023—barely made a dent in the selling pressure.
When positive news stops driving upside moves, you know sentiment has collapsed.
The Magnificent 7: The Most Crowded Trade Is Now the Most Dangerous
The Nasdaq is sliding, but that’s not the full story.
This was the most crowded trade on Wall Street—and now it’s unwinding.
According to Bank of America’s July 2024 Fund Manager Survey, 71% of respondents said “Long Magnificent 7” was the most crowded trade in the market.
Now, hedge funds are pulling exposure at a pace that mirrors 2022 and early 2024—both of which ended in painful sell-offs.
The latest Goldman Sachs Prime Brokerage data confirms what’s happening: positioning in the Magnificent 7 is collapsing, and every time this has happened before, the Nasdaq has followed lower.
What Traders Need to Watch Next
With the Volatility Index ($VIX) up over 70% in the past month, expect wild swings to continue.
Big money is repositioning, and that means 1,000 point moves in the Dow could become a regular occurrence.
The biggest opportunity in 2025 won’t come from chasing trades—it will come from recognizing shifts in sentiment before they fully play out.
If you’re not already watching for these trends, it’s time to start. The traders who can anticipate the next shift in positioning will have a massive edge in this market.
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