KOSPI down another 11%. Nikkei down 5%. SK Hynix down 50%. Trump tweets about Iran and Micron goes down 15% intraday.
All of these headlines have become ubiquitous this year, and this violent whipsaw in market price action has been unbelievable to watch. For years, the retail and institutional critique of crypto was the volatility. Animalistic spirits, too sentiment-driven, too-levered and even the best most serious assets like Bitcoin can drop 20% from an Elon Musk or China tweet. There was nothing fundamental propping up the market; it was just attention & noise.
Then 2026 happened.
KOSPI is down 40% from its June peak and entered a bear market just 3 weeks after making all-time highs. Before, this year the circuit breakers for the KOSPI were only triggered 6 times in 25 years and now they’re getting triggered every other day. 7 times in a span of a few months to be precise.
None of this is crypto. But all of it trades like crypto. SK Hynix and Samsung are companies which produce products people & institutions use and yet their stock price trades like a memecoin released on Pumpfun an hour ago.
Trader Psychology
The first mechanism of this distinct change in price action is behavioural. The marginal participant in equity markets no longer has a long enough time horizon to justify their investment thesis. They trade and hold equities on short time horizons because gains which would’ve been achieved in years are being achieved in a matter of a few weeks.
We saw this in April where the Nasdaq went up 34% in 5 weeks and many stocks like Micron or Sandisk were up 300%. And now those same companies have had their gains cut in half.
To get into the crux of why this is taking place, I did a bit of digging to see if there was a change in market behaviour from previous years. What I found is that this violent whipsaw in price action is attributed to the market’s inability to hold a view, because of how much information there is that gets released on X and other mediums in a matter of minutes, hours & days. Knowledge accessibility has become so easy in the age of AI, that news that would have been digested over a quarter is fully priced, over-priced and under-priced within minutes.
An example of this was just last week, when Google increased their capex guidance outlook for 2027 and in theory this should be good for the Semiconductor & Memory companies who will profit from this increased investment, but no! After a brief 5% sector rally the next day the market gave it all back because it was afraid of this same issue. A sell-side analyst said why would the hardware companies be given the premium instead of the hyperscalers when the hyperscalers are the one in control of this trade and if they ever cut capex then the whole hardware trade collapses.
Ultimately, I find that the market is the ultimate truth seeking behaviour and when views are fragmented this is presented in the price action. It’s not a coincidence that conflicting views of the AI trade from different sell-side analysts, retail etc make market behaviour so choppy that neither side wins.
Structural Attention Decay with Leverage: A Violent Mix
Currently, it also feels like the new generation of traders & thinkers are a product of short-formed content resulting in shorter duration bets. No matter what your feed is showing you, you’ll often find that the odd Instagram reel or Tik Tok shows content from someone who made a lot of money at a young age and is flaunting their wealth through consumerism.
And then you think, why not me?
Consequently, you take larger sized bets using leverage in a bid to make it out of your current socio-economic status so you too can flaunt your wealth on Tik Tok and social media. And this becomes a violent flywheel. It’s not a surprise that the US and other countries around the world are increasing their leveraged ETF assets which is now at $200 billion compared to roughly $30 billion in 2009. Daily trading volumes across leveraged products now run around $40 billion which is more than the entire leveraged ETF industry held in total assets 5 years ago. Making it in the market is now the new American Dream.
So what we have now is a generation of short-minded gamblers and the levered ETF products are the gateway drug for these people to make it. In my opinion, this trend of excessive risk-taking isn’t slowing either simply because of the environment we live in where the average 9-5 doesn’t pay enough to suit one’s lifestyle so people will gamble, trade, bet on memecoins just to find ways of making it out the rat race.
Trading attention with leverage was initially novel to Crypto’s market structure where you saw cascading liquidations like the October 10th crash and many before it, but now the casino is getting bigger and your average retail participant will either make it or lose it all.
As they say, there’s no crying in the casino.