When deciding whether to “buy the dip” on the day of a sharp sell-off, the key is to distinguish between a temporary policy shock and a structural breakdown in the underlying investment thesis.
In the case of November 6, the declines in U.S. stocks and cryptocurrencies were similar in nature, but with subtle yet important differences.
U.S. stocks: Avoid catching a falling knife in the short term, but there’s no need to be pessimistic about the medium term
The sharp drop in U.S. stocks on November 6 was triggered directly by a “political shock,” not by a sudden deterioration in fundamentals.
After a major victory in the midterm elections, Democrats sent a strong signal in favor of tighter regulation, proposing to pause advanced AI development and impose restrictions on data center construction. This struck directly at the most vulnerable part of the current AI bull market: the sustainability of capital spending.
UBS estimates that about 30% of the data center capacity expected to be added in the United States by 2028 could be affected by a potential construction pause.
The Philadelphia Semiconductor Index plunged 12.25% in a single day, while the Nasdaq fell more than 10% from its October high, officially entering correction territory.
But the key point is this: it is a one-off repricing of regulatory expectations, not the disappearance of AI demand itself.
Goldman Sachs strategists explicitly noted that AI stock valuations have already been marked down, short positions need to be covered for profit, and market positioning is actually “much healthier” now that election uncertainty has eased.
Even before the plunge, JPMorgan argued that October’s hedge fund deleveraging and liquidation of AI positions had created a more favorable backdrop for U.S. equities, and maintained its tactical bullish stance.
However, there is one near-term risk that must be acknowledged: the panic has not yet run its course.
LPL Financial strategists noted that although volatility was high that day, it had not reached the extreme levels typical of historical “capitulation” phases.
The presidents of the Cleveland and Richmond Federal Reserve Banks both sent hawkish signals on the day of the plunge, suggesting that interest rates could be raised again in December and further dampening near-term risk appetite.
Historically, going all-in on the day of peak panic, when the VIX surges more than 50% in a single day, has not had a high success rate.
/Cryptocurrency: correlated deleveraging, not an independent narrative
The decline in cryptocurrency was not driven by any crypto-specific negative news.
Bitcoin fell below $76,000 and Ethereum dropped to around $2,200. Approximately $1.25 billion in positions were liquidated across the crypto market in 24 hours, including $1.11 billion in long positions.
The drivers are clear: a crash in U.S. technology and growth stocks → the same pool of investors seeking high-risk returns pulls out simultaneously → leveraged crypto longs are liquidated algorithmically → cascading selling amplifies the losses.
This means that whether cryptocurrencies can stabilize in the near term depends almost entirely on whether U.S. technology stocks can stop falling.
The correlation between crypto assets and U.S. technology and growth stocks is currently high. Before risk appetite recovers in traditional markets, crypto is likely to remain highly volatile.
Over the medium term, 10x Research’s founder expects Bitcoin could still reach $90,000 by year-end, though it may first fall to around $75,000–$79,000.
Citi’s 12-month price targets are $113,000 for Bitcoin and $3,028 for Ethereum, but these are medium-term, year-ahead reference points and should not be used to guide entry decisions on the day of a market plunge.
Overall assessment and asset selection
We do not recommend going all-in to “buy the dip” on the day of a plunge, but it may be time to start building a starter position in stages.
The reason: the policy shock to U.S. equities is likely to be short-lived, but the panic index has not reached historically extreme levels, and hawkish signals from the Federal Reserve have added near-term pressure. Crypto is simply following U.S. risk appetite and has yet to show any independent signs of stabilization.
If you decide to enter in stages, prioritize “quality that has been unfairly sold off” over “high-beta assets that have fallen the most”:
For U.S. equities, the areas Morgan Stanley identified before the pullback remain worth considering: high-quality companies with improving earnings expectations, such as Google parent Alphabet, Apple, Broadcom, Micron, and Visa.
Goldman Sachs highlighted a benefit that is easy to overlook: if future computing capacity expansion is constrained, hyperscale cloud providers that have already deployed substantial capacity (Amazon, Microsoft, and Alphabet) could actually become more valuable because of the scarcity of existing computing capacity. By contrast, “pick-and-shovel” companies (semiconductors, cooling, and power equipment) face greater near-term risks from project delays. The Philadelphia Semiconductor Index ETF has fallen by a fifth over the past month; although the pullback is steep, the sector is more sensitive to policy developments.
JPMorgan’s “technology-plus-cyclicals barbell, tilted moderately toward cyclicals” is also a useful framework for hedging the concentration risk of a single AI narrative.
On the crypto side, if participating, Bitcoin offers greater certainty than Ethereum.
10x Research explicitly expects Bitcoin to outperform Ethereum and questions the value returned to ETH holders. In a cross-asset deleveraging environment, ETH has higher beta and greater leverage. It may rebound more sharply, but the risk of a disorderly sell-off is correspondingly higher.
The same applies to major coins such as SOL: they are not ideal first choices for buying the dip before risk appetite recovers.
One rule for managing position timing: don’t go all-in on the day the VIX surges.
Wait for at least one of two signals before considering increasing exposure: a daily chart pattern showing heavy-volume stabilization in U.S. tech stocks, or a sustained decline in the VIX from elevated levels.
Until then, entering with a starter position or through staged dollar-cost averaging is more consistent with the current market state—“panic has not yet run its course, but the medium-term thesis remains intact”—than trying to “catch a falling knife” all at once.