Goldman warns market flows are “gross down,” hiding selling that can hit crypto
Goldman Sachs derivatives specialist Cullen Morgan cautioned that current equity strength may be misleading. In his note (dated Aug. 3), Morgan said market flows are more “gross down” than “net up,” meaning heavy selling pressure is hidden beneath a seemingly healthy rally.
Morgan, a VP focused on equity derivatives and client flows, highlighted that net returns can look positive even when gross selling is large. He framed this with a gross-vs-net concept: a positive net flow can still mask substantial distribution.
He also referenced his prior work on CTA (Commodity Trading Advisor) positioning. In earlier notes (2024–2026), Morgan flagged CTA long equity exposure at the 94th percentile, and estimated potential CTA sales ranging from $1.2B to $32B depending on the scenario—figures consistent with systematic, momentum-driven liquidation when signals worsen.
Why this matters for crypto traders: Bitcoin and broader digital assets have become more correlated with equity risk sentiment. If systematic cross-asset momentum strategies sell what’s liquid as flows deteriorate, those equity “market flows” can spill into crypto volatility.
Traders should watch flow quality and breadth in traditional markets as a leading indicator. Goldman’s warning implies the rally’s sustainability risk may be rising, even if headline indexes remain firm.
Bearish
Morgan’s core message is that market flows are “gross down,” implying substantial hidden selling even when net performance looks positive. In crypto, this can matter because Bitcoin’s recent behavior has increasingly tracked equity risk sentiment. If systematic, momentum-driven CTA-style liquidations pick up, equity volatility can transmit into crypto through correlation and cross-asset risk management.
Historically, when the market narrative is supported by net indicators but underlying positioning/flow quality deteriorates, rallies often face sharper drawdowns once liquidity providers step back. In the short term, traders may see higher downside risk, wider intraday swings, and a greater chance of sell-offs on otherwise “good news.” In the longer term, sustained gross selling pressure and potential CTA de-risking could keep upside capped and increase the probability of trend reversals, particularly during risk-off regimes.