The recent surge in both stock and crypto markets has left many traders optimistic. But not everyone shares that confidence. A veteran trader, Wealthmanagerrr, has sparked debate on X after revealing he has sold most of his positions, warning markets could face a sharp correction in the coming months.
And his concern isn’t just a gut feeling, the data backs his claim.
Rising Margin Debt Raises Red Flags
According to new data from FINRA, U.S. margin debt has jumped above $1.1 trillion, the highest ever recorded. This even beats the levels seen before the big market crashes in 2000, 2008, and 2021.
This means many investors are borrowing large amounts of money to buy more stocks and crypto, hoping for bigger profits. But history shows that such excitement often ends badly. When prices start falling, those same investors are forced to sell to cover their loans, which causes prices to drop even faster.
The trader warned that this heavy use of debt could set off a “chain reaction” if market confidence suddenly disappears.
Past Crashes Hint at a 25% Market Fall
However, the warning isn’t without reason. In 2000, when margin debt hit its previous peak, the S&P 500 fell by nearly 50%. In 2008, it dropped 56%. Even in 2021, high leverage led to a 25% correction.
Each time, over-leverage played a major role.
Now, with margin debt higher than ever and inflation creeping up again, the setup feels almost familiar.
On top of it, Fed Chair Jerome Powell’s recent comment that another rate cut in December isn’t “a foregone conclusion” only added pressure, strengthening the dollar and cooling investor sentiment just as markets appear stretched once more.
Stocks and Crypto Could Be Next
While many retail investors continue to “buy the dip,” the trader has taken the opposite route. He’s exited most of his positions, holding only Bitcoin and Ethereum for the long term, and moving the rest into stablecoins.
He expects a major correction within the next 3–9 months, affecting both the stock and crypto markets.
With the cost of living climbing again and borrowing costs still high, he believes markets are “highly overextended” and due for a major.
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