6/5 Nasdaq Plunges 4.77%: It Wasn't the Non-Farm Payrolls! Crypto Crashed 48 Hours Earlier, SpaceX $75B IPO + Google $847.5B, Market Maker Negative Gamma Death Spiral—A Pure Mechanical Deleveraging. When to Buy the Dip, When to Avoid Catching a Falling Knife

This episode provides a detailed analysis of the true reasons behind the 4.77% plunge in the Nasdaq on June 5, 2026. Through methods such as timeline reconstruction, interest rate falsification, and cross-sectional comparison, the host points out that this crash was not caused by interest rate hike panic triggered by strong non-farm payroll data, but rather a purely mechanical deleveraging event driven by a prior collapse in the cryptocurrency market, massive capital drainage from tech giant financing, and negative Gamma from options market makers.

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The Nasdaq 100 index plunged by about 5% on the last trading day of last week. The Nasdaq Composite Index also fell by 4.18%, with the entire U.S. stock market evaporating about $1 trillion in market capitalization in a single day. If you open any financial media outlet, the narrative is surprisingly consistent. What do they say? They all attribute it to the non-farm payroll data for May released at 8:30 that morning. Oh, that data was just too strong, with 172,000 new jobs added, far exceeding the market's expectation of just over 80,000. So, how is all the commentary interpreting this? The explanation given is that the Federal Reserve was so scared that it would not only stop cutting rates but might even have to raise them by the end of the year, so the entire growth stock sector was hammered. This explanation sounds very logical, right? But what I want to tell you is this: this logic is wrong from beginning to end, and it is wrong to a ridiculous degree. That day.

The non-farm data was indeed a fuse, but it was absolutely not the root cause of this crash. Where is the real reason hidden? It is hidden in places you usually don't see: in the hedging books of options market makers, in the liquidation data of the cryptocurrency market from two days prior, and in the capital operations of several tech companies that were aggressively draining liquidity. Now, let's do the simplest thing: let's sort out the timeline of this event. Because if you want to determine if there is a causal relationship, the most basic method is to see what happened first, right? If the non-farm data were truly the culprit, then the market should have only started to crash after it was released at 8:30, right? But what are the facts? The facts are that two to three days before the non-farm data was released, the slaughter had actually already begun. It's just that the main battlefield at that time was not the U.S. stock market, but the cryptocurrency market, which is most sensitive to leverage.

The internal market is currently like the canary in the coal mine within liquidity, because it is the most sensitive to risk and the first to die from toxic gas, as its leverage is the highest. Look at this: the red line for Bitcoin started dropping downwards as early as June 2, falling by 5% first to around 68,000 USD. By June 3, it dropped to 65,000, and by June 5, it plummeted to a low of just over 59,000, marking the lowest point since February of this year. On June 4 and June 5 alone, the crypto market saw 1.73 billion USD in leveraged positions liquidated, with 211,000 people facing forced liquidation, 85% of whom were long positions. What kind of concept is this? This is a textbook bull massacre. Now look at the dark blue Nasdaq line. On June 4, when the crypto market was already bleeding, the US Nasdaq index only fell by 0.5%, and the Dow Jones index even hit a historical high that day.

In other words, while the US stock market was still peaceful and quiet on June 4, the crypto side was already completely blown to pieces. It wasn't until the non-farm payrolls release on June 5 that the Nasdaq took a nosedive and fell by about 5%. So, was the collapse in risk appetite caused by the non-farm payrolls, or did risk appetite start collapsing much earlier where leverage was highest? Thus, we can clearly see that the non-farm payrolls were merely the last straw that broke the camel's back, rather than the non-farm payrolls triggering the market crash. This is a complete inversion of cause and effect in logic. Well, looking at the timeline alone is not enough; let's falsify the core logic of the mainstream narrative from the perspective of interest rates. It goes like this: strong non-farm data leads to rising rate-hike expectations, which increases the risk-free rate, thereby raising the discount rate for growth stock valuations, and thus growth stocks are crushed. However, the most crucial link in this chain, the 10-year US Treasury yield—if it were truly the culprit—should have reacted a certain way as soon as the non-farm data came out.

What should it have done? It's a simple question: the 10-year US Treasury yield is the pricing anchor for all market interest rates, so this yield should have broken through and shot upward. But what were the facts? Looking at this chart, the 10-year US Treasury yield had already surged to 4.61% as early as May 18, which was the highest point in a year. The 30-year yield had already broken 5% by then. By June 5, the day of the non-farm report, this yield only slowly rose by 6 basis points to 4.54%. Note that it was actually lower than the high point in mid-May. So the question arises: if the discount rate was truly the primary factor, then the Nasdaq should have crashed on May 18 when interest rates were at their highest. That is a complete logical chain, right? Then why did it crash on June 5 when interest rates were even lower? This logic simply does not hold up. Furthermore, we can run another calculation: even for growth stocks with the longest duration, the theoretical valuation impact should only be between 0.3% and 0.6%. Yet the actual drop was 4.77%. The two are not just slightly different; they differ by an order of magnitude. Therefore, the huge gap in between cannot be explained by interest rates at all, and must be filled by something else. What is that something else? It is leverage and liquidity. Below, I will show you an even harsher counter-evidence. This is called cross-sectional falsification, meaning that on the very same day, the performances of different indices are completely different. From this discrepancy, we can spot the true culprit. Look at this: the small-cap stocks that rely the most on borrowing and leverage and are most sensitive to interest rates—namely the Russell 2000 index—only fell by 3.31% that day, which is even less than the Nasdaq's 4.77%. This is highly abnormal. If it were truly an interest rate shock, then small-cap stocks with the highest leverage and greatest fear of interest rates should logically have suffered the worst plunge, right? Instead, they...

Instead, it was the most resilient, which shows that the fundamental driver of this sell-off is not market-wide interest rate discounting, but rather a specific, crowded deleveraging of tech stocks. The non-farm payrolls report is, at best, an excuse; it was the trigger, not the bullet. Okay, since it is not non-farm payrolls and not interest rates, what on earth sucked the money out? This brings us to a core mechanism, known in English as crowding out. Put simply, the pool of money in the secondary market is currently very limited, not to mention limited incremental funds. Right now, someone has also inserted several giant water pumps into the pool, frantically sucking away the existing capital. The remaining money is not enough to support the market, so stock prices naturally collapsed. Let's take a look at just how thick these water pumps are. The first one is definitely SpaceX, with its IPO scheduled to start around June 12, which is next week, raising at least 75 billion dollars.

With a valuation exceeding 1.75 trillion, this is the largest IPO in human history, two and a half times larger than Saudi Aramco's in 2019. Fund managers now have to take an action: in order to clear up positions to buy it, they must sell off the tech stocks and crypto assets in their hands in advance. The second one is Alphabet, Google's parent company, which priced an 84.75 billion dollar equity offering on June 2, of which 10 billion was sold directly to Warren Buffett's Berkshire Hathaway. So now we can see that even Google has to run to the public market to raise such a huge amount of money to support this expenditure, which in itself is quite outrageous. The third one is Meta, which also launched a multi-billion-dollar offering on June 5. Equity financing from just these three companies alone will suck over 167 billion dollars in liquidity out of the market within a few short weeks. And that's not even all; what is the larger backdrop? It's that hyperscalers like Amazon, Microsoft, Google, and Meta.

These mega-scale computing power providers are expected to see their total capital expenditures for the full year of 2026 reach 700 billion dollars, with about three-quarters of that pumped into AI infrastructure. UBS has even raised its forecast for global AI capital expenditure to 820 billion dollars, with some estimates exceeding 1 trillion dollars. So everyone can think about this question: when a market is asked to swallow such a massive volume of financing and expenditures within just a few weeks, how could the existing liquidity not be sucked dry? Layered on top of this is Broadcom's earnings report after the bell on June 3. In fact, both revenue and profit exceeded expectations, but simply because they did not raise their full-year guidance for AI chips, in a market where liquidity has been sucked dry and pricing is extremely demanding, it immediately turned into a huge negative catalyst, causing the stock price to plummet by 12.59% and wiping out over 30 billion dollars in market value in a single day. So now, looking back at the overall pattern: giants are draining liquidity, passive index rebalancing is front-running, plus.

So-called earnings blowups without warning, these events resonated together at the microstructural level, triggering a sharp deleveraging. Therefore, this crash is essentially a liquidity event, nothing else. Now, let's dive into the most microscopic layer: the hedging books of options market makers. This might be a bit convoluted, but I will try my best to explain it clearly because it is the mechanical engine behind this undefended crash. There is a key Greek letter here called gamma, which we've mentioned before. What does it measure? It measures the speed of a market-maker's hedging exposure as prices change. Under normal circumstances, market makers actually hold positive gamma. When they are in a positive gamma state, their hedging behavior dampens volatility—meaning when prices fall, they have to buy, and when prices rise, they have to sell, acting like a damper for the market. However, once the price drops below a certain critical strike price, their net exposure instantly flips to negative.

Gamma, at this point, the shock absorber turns into an accelerator. I have explained this principle to you before, and it creates a situation where the more the price falls, the more they have to sell. After selling, the price falls even further, and as it falls, they sell again, forming a self-reinforcing death spiral. This is why the market experienced that kind of free fall without any resistance on June 5th. How do we prove that market makers were in a negative gamma state that day? First, in the chart just now, the S&P 500, with 1.8x positive gamma, only fell by 2.64%, while the Nasdaq, with negative gamma, plummeted by 4.77%, nearly 5%. This discrepancy itself is the fingerprint of negative gamma amplification. Second, there is a particularly counterintuitive detail here: the panic index, VIX, only rose by 15.6% that day, closing at 19.65, not even breaking 20. So, think about it: the index fell by 4.77%, yet the VIX, which measures panic, was so calm. What does this mean? This.

It means the market was not pricing in sustained panic at all. This was simply market makers dumping stocks in futures and spot markets to hedge their negative Gamma, rather than frantically buying insurance in the options market. That is why there was this divergence where prices crashed while the VIX did not break 20. To put it bluntly, this was a mechanical deleveraging event. If the fundamentals had truly collapsed, the VIX would have already surged to 30 or 40. For specifics, you can refer to that "Liberation Day Tariff." There is another detail: Citadel, a top-tier market maker, had already warned as early as May 17th that the protective demand for market declines had collapsed. While the market was hitting new highs, everyone had sold off all their insurance. Therefore, when the real decline started, there was no one at the bottom to catch the falling knife. Of course, for a micro-level stampede to be triggered, it still needs macro leverage as fuel. How full is this fuel tank? Let's look at margin debt, which is the total amount of money retail investors and institutions borrow from brokerages to buy stocks. According to data from the Financial Industry Regulatory Authority (FINRA), margin debt reached $1.304 trillion in April 2026, setting another historical high, a year-on-year surge of 53.3%, accounting for about 5.2% of GDP, which is 3 percentage points higher than the peak of the 2008 financial crisis. What is even more interesting is that after peaking in January this year, it fell for two consecutive months in February and March, but then hit a new high in April, indicating that leverage was pushed to a limit again before the crash. This is like dry firewood spread all over the ground, just waiting for a spark. That spark was the crypto market we mentioned earlier, and the fuse that ignited it is worth discussing: that largest corporate holder of Bitcoin in the world, originally named MicroStrategy, now renamed to just Strategy—they dropped the "Micro," and I don't know what the significance of that is. However, this company did something earth-shattering at the end of May, for the first time ever.

They sold Bitcoin. Although they only sold 32 coins and didn't cash out much—just over $2 million—their founder, Saylor, had been bragging for years that he would only buy and never sell. This was the first time he broke his word years after setting that flag, so the signaling effect is extremely negative. You might wonder, why did he sell? The problem lies in a floating-rate preferred stock they issued, with the ticker STRC. The principal of this preferred stock was originally designed to stabilize around $100, but because Bitcoin fell earlier and the related stocks fell even harder, investors wanted higher compensation, which ended up pushing the dividend yield of STRC up to 11.5%. And STRC holds 843,000 Bitcoins with an average cost of $75,000, meaning that when Bitcoin fell to $63,000, their book loss had already exceeded $10.8 billion. On one side is a massive loss, and on the other, they have to pay these high dividends.

Then he is forced to sell his core Bitcoin holdings for cash, which triggers a textbook death spiral: the stock price drops, financing costs soar, then he is forced to sell more coins, the coin price drops further, triggering even deeper panic. Smart money outside the market, especially those institutions, see exactly what is happening and immediately realize that a systematic deleveraging has begun. Connecting all these points, the essence of this crash becomes clear: it is a purely mechanical deleveraging event. In financial mathematics, there is a specific model used to describe this phenomenon where selling leads to more selling, known as the Hawkes process. I will discuss this in future member-only episodes; if you are interested, you are welcome to join the "Ruthless Gang." Simply put, what is this? It means that every sell-off increases the probability of subsequent sell-offs, and the sell-off causes the intraday time-series volatility to jump. The higher the volatility, the more it triggers forced position reductions and margin calls from risk models.

This then triggers more selling, spiraling downward. There is a key parameter here called the branching ratio, which measures whether this spiral will stop on its own or diverge infinitely. We measured the branching ratio for this event to be between 0.85 and 0.95. Although it is very close to the critical point, it is far from the level of divergence. Professionally, this is called subcritical, meaning that although this sell-off spiral is fierce, it will eventually exhaust itself; it will not spread infinitely, nor will it collapse indefinitely. In fact, some results appeared at the end of the trading session on June 5th, and there was no disorderly circuit breaker, which gives us a very important judgment: as long as there are no new major shocks, this deleveraging process will stop on its own within a few days. In other words, this is not a real market collapse; you should only view it as a liquidity event. So, should one be afraid of this kind of deleveraging? I have compared several violent deleveraging events in history.

I pulled them out for comparison and found a very clear pattern. Look, it's clear at a glance. All deleveraging events fall into two distinct groups, which are two types. The group in the upper right corner represents a fundamental collapse, such as the 2000 dot-com bubble, where the Nasdaq fell by 78% and took 15 years to return to its previous high. Another example is the 2008 financial crisis, where the S&P fell by 57% and took about five years to recover. These are the truly fatal ones because they are structural problems of valuation and credit. The group in the lower left corner is purely mechanical deleveraging. For specific references, you can look at the yen carry trade unwinding in August 2024, which recovered within a week. There was also the 2025 event, and the one at the end of 2000, where it fell by 9% within a week but recovered in less than four weeks. These deleveraging behaviors have one thing in common: the fundamentals are not broken; what is broken is only the leverage and the crowding. Therefore, it falls

fast and recovers just as fast. So, which category does this one belong to? Without a doubt, it belongs to the lower left category. Why do we need to distinguish between deleveraging and fundamental collapse? Distinguishing between the two is the only key to judging whether to buy the dip or run, right? Since it is deleveraging, you cannot use traditional methods like drawing support and resistance lines; these are useless because this sell-off is a mechanical action forced by risk control programs, and it doesn't look at those lines at all. To find the real bottom, you have to deduce it from the limits of leverage clearing and the structure of option positioning. Otherwise, if you just draw a line, why would that line be useful? You can't explain the logic, right? We look at it from three dimensions. First is the CTA trend-following funds, as mentioned before, which is a type of fund that adjusts weights based on volatility indices. Then there is the trend, which is a quantitative fund that performs mechanical position adjustments. Goldman Sachs estimates that they can dump about $80 billion in selling pressure during a round of deleveraging.

What if the S&P drops below a certain critical level? It might trigger a second round. Second, regarding retail margin accounts, during margin liquidations, historical drawdowns typically range between 10% and 20%. Once this window is reached, the intensity of concentrated liquidations will exhaust itself. If you calculate based on this logic, this bottom is roughly between 26,000 and 27,600, or more rigorously speaking, it depends on whether selling pressure in this range will exhaust. Third is the dense zone of put options for option market makers, known as the put wall. If you superimpose these three dimensions, the core support zone derived for the Nasdaq 100 is between 26,800 and 28,000. The most extreme lower shadow might smash down to around 26,500. But knowing the price points is not enough; you also need to know how to confirm that this bottom has truly arrived, rather than catching a falling knife halfway down the mountain. So what should we look at? First, market makers' Gamma flipping back to positive; this is the master switch. Once it flips positive, their hedging positions will change.

They will shift from accelerating the decline to providing a floor. Second, the VIX term structure returning from inversion to normal, professionally known as contango, meaning that longer-term volatility is once again higher than near-term volatility. What does this signify? It signifies that panic has receded. Third, funding rates in the crypto sector turning positive, and open interest contracts beginning to stabilize. Ah, this means the canary is coming back to life and jumping around again. Fourth, the CTA's 80 billion selling pressure is basically released, and the dark pool index VIX reclaims 45%, indicating that institutions have transitioned from distribution to accumulation. Finally, global correlation peaks and rolls over. What does that mean? It means individual stocks are trading based on their respective fundamentals again, rather than rising and falling in unison. Ah, once you gather three or more of these factors, that bottom is basically in place. Before that, no matter how deep it falls, it is still within the script of a liquidity vacuum; absolutely do not catch it. Well, let me summarize it for you in one sentence: this crash on June 5th was not at all.

It was not some rate-hike panic triggered by non-farm payrolls; that was just Wall Street's fucking bullshit narrative. So basically, you shouldn't believe what they say. To put it bluntly, the non-farm payroll panic was just a fig leaf, and furthermore, it's an explanation that's easy for retail investors to understand. But in reality, it's not that thing at all, because when you sort out the truth along the timeline, it becomes extremely obvious. Liquidations in the crypto market led the way and served as the canary forty-eight hours later, the massive margin borrowing by tech giants was still frantically draining liquidity, option market makers' negative Gamma was mechanically trampling the market, and finally, a historical level of high leverage resonated into a liquidation event, turning into a pure leverage-killing exercise. What it cleanses is fickle leverage and speculators, not artificial intelligence fundamentals. Therefore, instead of listening to the media blindly hyping rate hikes, you'd better keep a close eye on the real signals I just mentioned: crypto funding rates, market makers' Gamma, CTA selling pressure, and whether the selling pressure in that support zone will diminish. Only by understanding this set of indicators can you transform from that harvested leveraged bull.

Into the group of people calmly picking up shares at the bottom. It's very simple: these concepts haven't been fully hyped yet, the major whales haven't left yet, and there are still commercial aerospace, quantum computing, OpenAI going public, and Australian going public waiting behind. This whole array of concepts hasn't finished fermenting yet. Until it finishes fermenting, these guys cannot leave; it's as simple as that. Well, that's all for today's broadcast. If you like my show, please click the bell icon below. If you want to support me, you can join the membership channel. Every in-depth show in the membership channel has drivers; welcome to join the badass crew. See you in the next episode.