According to senior trading coach at Learn To Trade Jeff Triganza, the stock market drop was led by bitcoin and cryptocurrency.
Speaking to the Nest Egg podcast team, he explained that while there’s a lot less money in cryptocurrency than in US shares, it was cryptocurrency that catalysed the fall.
“You [should] think of the market like an animal, I guess. It's just like us. It breathes in, it breathes out,” Mr Triganza continued.
“The funny thing is that bitcoin's led this down. Bitcoin had its collapse first, and then the share market followed, which I think is very interesting.”
The trading coach argued that as cryptocurrency’s market capitalisation increases, so too does its impact on the share market.
He said, “Sophisticated investors are seeing it as another asset class. Ten years ago people might have a portion of their money in Aussie equities, a portion of their money in international equities.
“Now bitcoin is becoming something like that. I guess most large, sizeable portfolios would have 5 per cent or 10 per cent of their money in cryptos.”
Speaking more broadly, Mr Triganza reminded investors that the market isn’t as buoyant as it has been in recent years, and that investors are right to be feeling a little bit nervous.
“I think we're just about to go into quite a sizeable correction here,” he warned.
Nevertheless, the real reason for the market plunge was likely nothing more sinister than the nature of markets.
“If you consider the market a little bit like a hot air balloon and it drifts upwards and then all of a sudden they turn off the heat. That's pretty much all that happened,” Mr Triganza said.
“The buying dried up, it all dried up at the same time, and the market fell. That's pretty much it. It's not worth getting concerned about. These things happen. Everything that goes up comes down.”