Goldman Sachs Trader: Bitcoin's "Monday Flash Crash" Is a "Leading Indicator"

The market pace is slowing down, and some consensus trades are experiencing a wave of stop-losses.

Written by: Dong Jing

Source: Wallstreetcn

Goldman Sachs trader Paolo Schiavone has warned that Monday’s bitcoin flash crash is the first signal of an imminent market shift, marking a potential cooling off after three weeks of risk asset frenzy.

On September 26, Goldman Sachs trader and strategist Paolo Schiavone posted that over the past three weeks, risk assets have experienced an absolute sprint, with momentum trades seeing clear returns, but the pace is now changing.

This Monday, bitcoin’s sudden flash crash was seen by traders as “the first real signal”—the market’s pace is slowing, and a “deceleration” is needed in the short term.

The cryptocurrency market plunged suddenly on Monday, with $1.7 billion worth of long positions forcibly liquidated in an instant. Bitcoin, Ethereum, and almost all mainstream cryptocurrencies were impacted. On Thursday, bitcoin continued to fall, breaking below the $110,000 mark and currently trading near $109,000.

He believes that while the basic situation is a manifestation of the “month-end effect,” some key trends in the market are starting to appear overextended. For example: the macro environment remains highly volatile; consensus trades (shorting the US dollar, steepening the yield curve) are under tremendous pressure.

Despite the risk of short-term corrections, this trader’s fundamental view is that the market is heading toward a “melt-up” rally. He believes that any pullback in risk assets will be met by buyers, due to factors such as tariffs having peaked, fiscal stimulus being brought forward significantly, financial conditions easing, imminent rate cuts, and the real impact of AI.

Bitcoin Technical Signals Draw Attention

Paolo Schiavone elaborated on the shift in current market conditions.

He stated that over the past three weeks, the market has experienced an “absolute sprint,” with momentum trades yielding clear returns. However, the situation is now changing.

Monday’s bitcoin flash crash was the first sign of a market shift, occurring in an environment where bitcoin is leading rather than lagging—meaning bitcoin is playing a leading role rather than trailing other assets.

Schiavone specifically mentioned that the $110,000 level has become an important technical support for bitcoin: “Nothing good happens below the 200-day moving average.”

He believes this level is more likely to act as support rather than resistance, indicating that bitcoin’s structural significance has surpassed that of crypto assets themselves, becoming a symbol of overall risk appetite.

Macro Situation “Volatile”, Consensus Trades Under Pressure

Although he views the current market weakness as a manifestation of the “month-end effect,” he also acknowledges that some trends in the market have become “clearly overextended.”

For example, mainstream consensus trades such as “shorting the US dollar” and “going long on yield curve steepening” are facing continuous stop-losses, and the macro situation remains “highly volatile.”

Paolo Schiavone pointed out that in a market environment dominated by technical levels and stop-loss behavior, bitcoin’s sharp volatility could be a prelude to macro risks.

The article states that when he surveyed his client base, he found that opinions were evenly split 50/50 on whether greater risk lies in growth or inflation. This reflects a deep divide in the market’s outlook for the economy.

He specifically pointed out that the market’s risk assessment of future growth versus inflation remains highly divided: “50% of clients worry about inflation, 50% worry about growth.” This itself is a signal of the market’s lack of direction.

For the US economy before the end of the year, the trader estimates GDP growth at 2%, core PCE at 3%, and unemployment rate reaching 4.5%. The key question is whether restrictive policy rates are needed, or if rates should be below neutral. He believes the terminal rate may be close to 2.5%.

In the bond market, he said, “I have always been pessimistic about fiscal conditions, but now it’s hard to agree with the so-called ‘fiscal dominance’ narrative.” He added that the 30-year US Treasury yield may end up in the 4.25–4.5% range in 2025.

“Melt-Up” Logic Chain Forming, Technicals Flash Warning Signals

The trader has constructed a complete logic chain supporting the market’s move toward a “melt-up.”

First, the impact of tariffs has peaked, providing a relatively stable policy environment for risk assets.

Second, fiscal stimulus measures will be significantly brought forward, providing momentum for economic growth.

At the same time, financial conditions are easing, supporting market liquidity.

The Federal Reserve’s rate-cutting cycle is about to begin. The trader maintains a forecast of “three insurance cuts,” and if nonfarm payroll data continues to be revised downward, a 50 basis point cut could even occur in October.

The real impact of AI also supports the long-term growth outlook.

He believes that the combination of these factors suggests that any pullback in risk assets will be met by buyers.

Although the fundamentals support the “melt-up” logic, as a technical analysis trader, Paolo Schiavone still notes some warning signals. Nvidia has failed to effectively break through its highs, the Nasdaq has formed a failed head-and-shoulders pattern, and is brewing an “expanding top.”

The trader emphasized, “Tops don’t ring a bell—it’s just the accumulation of signals. Bottoms are events, tops are processes.”