Financial markets are experiencing an increasing number of unexplained “flash crashes,” with both traditional equities and crypto showing sudden, dramatic price drops without clear catalysts.
In a recent example highlighted by The Kobeissi Letter, S&P 500 futures erased approximately $600 billion in market capitalization between 4:40 AM and 6:20 AM ET without any major headlines driving the move.
This phenomenon isn’t isolated to traditional markets. Crypto markets have faced similar issues, including a $300 billion wipeout over 24 hours on February 25th that occurred without any major bearish news.
Sentiment and Emotion Driving Market Volatility
According to data from the American Association of Individual Investors (AAII) highlighted by The Kobeissi Letter, bearish sentiment has reached 58.1%.
This marks four consecutive weeks where bearish readings exceeded 55%. This is a stark contrast to late 2024, when bearish sentiment consistently registered below 30%.
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