As the saying goes on social media: &#34;We are all bullish on Bitcoin; some just don't know it yet.&#34;
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On November 24th, Peter Tchir, a well-known strategist at Academy Securities, warned in his latest report that as the era of &#34;free money&#34; comes to an end, this hidden leverage is backfiring on the market. The logic that companies could see their stock prices soar several times simply by announcing massive spending plans has already collapsed over the past two years, and this reversal has become a core driver of the recent decline in the Nasdaq index.
Recently, the market has experienced severe volatility, with the Nasdaq 100 index leading the decline by over 3%, while the more representative S&amp;P 500 equal-weight index saw a drop of only 0.9%. This divergence highlights that the pain is primarily concentrated in the technology and high-growth sectors.
In particular, on October 10th, Bitcoin experienced a dramatic sell-off, plummeting from $122,000 to $105,000 during U.S. stock market closing hours. This &#34;mysterious&#34; crash not only severely impacted crypto assets but also exerted direct liquidity pressure on a broad range of stock portfolios through the transmission chain of ETFs and related listed companies.
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This phenomenon reveals a dangerous signal in the current market structure: cryptocurrencies, artificial intelligence infrastructure construction, and passive investment funds in U.S. stocks have formed a highly correlated &#34;iron chain.&#34; As the scale of passive investment surpasses that of active investment, through ETF tools like QQQ, hundreds of millions in retirement and hedging funds have effectively become deeply tied to the capital expenditure cycles of &#34;digital asset reserve companies&#34; like MicroStrategy and AI giants.
Currently, investors' attention has collectively shifted to the stability of the crypto market. Goldman Sachs trader Brian Garrett bluntly stated that many clients are viewing Bitcoin's performance as a barometer for future risk appetite, &#34;If Bitcoin's trend improves, the stock market rebound at the end of the year may get back on track.&#34;
<h2>The Collapse of the &#34;Free Money&#34; Mechanism</h2>
In his report, Peter Tchir attributed the recent market boom to the &#34;free money&#34; effect. The so-called &#34;free money&#34; does not refer to central bank liquidity injections but rather to a specific phenomenon in corporate capital operations: when a company announces spending of X amount, and its market value increases by more than X, it effectively creates &#34;free&#34; shareholder wealth. This logic primarily existed in two areas:
First, in AI and data center construction. Previously, tech giants could receive enthusiastic rewards from the stock market simply by promising to build more data centers (i.e., the logic of &#34;once built, customers will naturally come&#34;). However, now, merely announcing increased spending can no longer translate into rising stock prices, and the market has begun to question the return on these massive investments
Once stock prices no longer support this, the next likely action for companies is to cut expenses, which will pose a threat to overall economic momentum.
Secondly, there are cryptocurrencies and &#34;Digital Asset Treasury Companies&#34; (DATs). Companies represented by MSTR once enjoyed significant valuation premiums, as they financed the purchase of cryptocurrencies, driving stock prices to rise far beyond their holding costs. This positive cycle was an important force supporting stock prices and underlying crypto assets. However, this chain is becoming increasingly difficult to operate, and many DATs' trading prices are gradually returning to not closely align with their net asset values (NAV), indicating that the channel for &#34;creating wealth out of thin air&#34; is closing.
<h2>The &#34;Amplifier&#34; Effect of Passive Investment</h2>
The prevalence of passive investment has exacerbated the complexity of this situation. Peter Tchir points out that when a large amount of capital &#34;blindly&#34; flows into the Nasdaq 100 Index (QQQ), 55 cents of every dollar goes to a few companies, including MSTR.
According to Bloomberg data, Vanguard, Blackrock, and State Street, as giants of passive investment, are among the top five holders of MSTR, with QQQ alone holding nearly $1 billion worth of MSTR shares. This holding structure means that once major index providers (like MSCI) adjust their rules, it will trigger significant capital flows.
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This indexed investment has made the volatility of crypto assets no longer confined to the crypto circle. The market is currently highly focused on whether MSCI will include DATs in its stock index (the decision is expected to be announced on January 15). If MSCI decides to retain or include these companies, it will avoid forced selling and boost market expectations for the subsequent inclusion of such companies in the S&amp;P 500; conversely, it may trigger mechanical selling by passive funds.
<h2>Soaring Asset Correlation and Wealth Effect Backlash</h2>
Bitcoin's market value has recently fallen from a high of about $2.5 trillion to $1.85 trillion, and with the evaporation of $650 billion in wealth, the market's &#34;wealth effect&#34; is facing headwinds.
Peter Tchir observes that with the popularity of spot ETFs, investors can no longer psychologically separate crypto assets from stock holdings in their mental accounts. When investors see a significant shrinkage of crypto ETFs in their overall stock accounts, panic is more likely to spread to the entire portfolio, which is a stark contrast to the past when assets were viewed in independent cold wallets.
Moreover, some well-known investors are surprised to find that certain non-crypto assets they hold exhibit a high correlation with Bitcoin. This usually indicates that the same group of investors is facing liquidity pressure—when crypto assets plummet, they are forced to sell other liquid assets (such as U.S. tech stocks) to raise cash. This cross-asset class sell-off has led to both Nasdaq volatility and the VIX index being elevated simultaneously.
<h2>Macroeconomic Fog and the Dilemma of the Federal Reserve</h2>
At the macro level, the policy path of the Federal Reserve has once again become elusive. Market expectations for a rate cut in December fluctuated sharply from 34% to 63% in just one day. Although employment data is mixed and inflation risks have not been fully alleviated, the end of the &#34;free money&#34; era may lead to a slowdown in AI data center spending, which in turn could cool the economy, providing the Federal Reserve with a reason to cut rates.
Meanwhile, the yield on the 10-year U.S. Treasury bond, as a safe-haven asset, has recently rebounded, and the rise in Japanese bond yields (with the 30-year Japanese bond yield reaching 3.3%) also warrants caution, as this may weaken the attractiveness of U.S. Treasuries in the long run.
Peter Tchir summarizes that the risks facing the current economy are greater than ever. If cryptocurrencies cannot stabilize, the resulting liquidity tightening and wealth shrinkage will not only end the tech stock frenzy but may also drag down the growth pace of the entire macro economy.
Everyone is holding their breath: the stabilization of Bitcoin will be the first signal for the market to confirm the end of &#34;painful trading.&#34;
Goldman Sachs trader Brian Garrett stated, &#34;Many of our clients believe that if Bitcoin's trading situation improves, a year-end rally may occur again.&#34;

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Academy Securities' well-known strategist Peter Tchir warned in his latest report that cryptocurrencies, AI, and passive investment funds in U.S. stocks have formed a highly correlated "iron chain" effect. The collapse of Bitcoin has not only severely impacted crypto assets but has also created direct liquidity pressure on a wide range of stock portfolios through the transmission chain of ETFs and related listed companies. Goldman Sachs traders stated that many clients are viewing Bitcoin's performance as a barometer for future risk appetite, "If Bitcoin's trend improves, the year-end stock market rebound may return to the right track."

- Peter Tchir from Academy Securities warns that the end of the "free money" era is negatively impacting the market, particularly the Nasdaq index, which has seen significant declines.  
- The correlation between cryptocurrencies, AI infrastructure, and passive investment funds has intensified, leading to liquidity pressures across stock portfolios, especially following Bitcoin's sharp drop in October.  
- Tchir concludes that if Bitcoin stabilizes, it could signal a recovery in the broader market, as many investors view its performance as a barometer for risk appetite.

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"Crypto Circle - AI - US Stocks" is interconnected, the era of "free money" has ended, and everyone is watching "when will the crypto circle stabilize"