Stay calm: we are not there yet

The markets have been quite volatile lately. It is influenced by many different factors: political, geopolitical, and overall fragile mood as such.

The biggest noise, as always, is made by the crypto world – the last week has been particularly painful to look at:

Overall, the crypto market capitalization lost +/- 700 billion 😉. Impressive enough to say the least. Market participants said the crypto sector on Friday saw more than $19 billion in liquidations across leveraged positions as panic selling and low liquidity triggered sharp swings. The plunge came after U.S. President Donald Trump announced late on Friday a 100% tariff on Chinese imports and threatened export controls on critical software.

Crypto analysts said this was the largest wipeout in a 24-hour period in the market's history. Nine times larger than the February 2025 crash and 19 times bigger than the March 2020 meltdown and the FTX collapse in November 2022.

Alternative coins or "Altcoins" - experienced fluctuations of up to 70%!!!!!! It is fair t say that altcoins just went full panic mode.

Looking at all this – as always – you want to scream that everything is bad, what can be done, crypto has no future, etc. etc.

With this statement from Trump – not only the crypto market was shaken. The stock markets experienced the consequences as well:

Here you can clearly see that the stock markets are not so volatile and easily influenced. There are both lower leverage risks and more balanced market participants.

Of course, the overall picture is not bright, but I don't see any real tragedy here either.

The main thing is to stay cool. Of course, the economic data is not brilliant, but it is not a tragedy either. By and large, nothing much has changed since my last look at the market.

What we can do is to take a look at the Fund flow measures. Fund flow measures the cash moving into and out of financial assets over specific time periods, often used to understand investor sentiment. According to Investopedia: Net inflow or outflow of funds in mutual funds and ETFs can signal investor optimism or caution in the market.

So, here we go – let's take a look at the Vanguard S&P 500 ETF, for example.

Why this one? – because it is the largest market participant by assets under management (AUM).

What do we see here?

The Vanguard S&P 500 ETF experienced significant volatility in capital flows in the first half of October.

At the beginning of the month (October 1), the fund recorded a strong outflow of about -2 billion dollars, which most likely reflected investor caution and profit-taking after previous market fluctuations.

However, the situation changed significantly in the following days - starting from October 5, the fund received more than 2 billion dollars inflows, and the positive sentiment continued in the following days.

By October 14, cash flows became steadily positive, and the fund recovered most of the initial outflow. This dynamics indicates the restoration of investor confidence in the US stock market.

When we zoom out and look at a longer period of time, let's say from the beginning of this year, we see that the cash flow is positive. This means that the positive sentiment still prevails.

Next, let's look at crypto market ETF cash flows.

Key chart elements

• Green columns: positive flows or money inflows into ETF funds (investors buy Bitcoin through ETFs).

• Red columns: negative flows or money outflows from ETFs (investors sell or withdraw funds).

• Black line: Bitcoin price (USD) (from ~$70k to ~$200k).

• X-axis: 2025 time period (from January to October).

Key Trends

1. Beginning of the Year (January–March 2025)

o Strong and volatile flows: large fluctuations in demand and supply.

o March sees a pronounced wave of outflows (several red peaks down to -15K BTC per day), which coincided with the Bitcoin price correction below $90K.

2. Spring and Summer (April–August)

o Starting in April, flows become mostly positive — green columns dominate.

o During this time, the Bitcoin price rises, reaching a peak in mid-summer (around $120K–130K in July).

o ETF inflows indicate that institutional investors continued to accumulate BTC.

3. Autumn (September–October 2025)

o Flows become uneven, with both inflows and pronounced outflows visible.

o Bitcoin price undergoes a correction, falling back to around $100K.

o This could indicate profit-taking after a prolonged price rise.

Overall, the 2025 Bitcoin Spot ETF data shows strong institutional interest, especially in the middle of the year, when the market became more optimistic. Most months show positive net flows, which helped support the rise in BTC prices.

And it doesn't look like everyone has lost faith in this market after the October 10 price drops and large price fluctuations. Even though the headlines are clearly marked "red", there is no panic in the market. On the contrary, one of the largest market participants "BlackRock", has only increased its positions in the crypto market in October (as of 16.10.2025) by 3.36 billion USD.

Nevertheless we must remain cautious – that is a fact! Another fact is that we must observe rational risk management. And there's no need to panic!

Now, when we look at economic indicators – such as the manufacturing sector – nothing bright and shiny there, but no tragedy either.

We are still stomping around the “50” mark, and, since recessions are observed when it falls below 45, we are clearly strate that we are not there yet. However, we have to admit that we have not seen any great growth in this cycle either.

Historically, the growth cycle is 4-6 years. Since we have been stagnating for a long time, circulating around “47-50 zone” for a while now, I would to say that we are in the late stage of the cycle. In my opinion, we still can expect some growth.

Also, if we look at the manufacturing sector in relation to GDP (quarterly growth data), we clearly see that the peak of economic growth is reached at high Manufacturing indicators. There has never been a situation when the growth cycle ended at the ISM mark of 50. Of course – there can always be a first time 😉...

If we analyze the ISM Manufacturing PMI (green line) in relation to the quarterly change (QoQ) of US GDP (purple line), a clear pattern is visible: Economic growth (GDP growth) is almost always achieved simultaneously with a high ISM indicator, usually in the range of 55-60 points.

The end phase of the cycle (before recession) usually occurs only after a period of high ISM (55-60), when the indicator drops sharply and GDP begins to slow down. This means that if the ISM has not yet risen above 50, there has never been a case in history when the cycle has already ended. That's – historically speaking.

What did I mean by that? Growth, although fragile, is there. We are on the other side of the cycle. Therefore I think there is still some growth ahead! Let's not stress too much at the first big fluctuations and look at everything with keeping cool instead.

Whenever you have doubts – remain calm and look at the prime source data. Your judgement should not be based on emotions!

That’s why I always say “KNOW Before You DO!”. If you want to understand my view on the markets in more detail – you are welcome to check out 👉 my course on https://investingshortcuts.eu/

Stay tuned!

Agris