Bear Market Bite
It's going to get worse, so act accordingly...
Dear subscriber,
Feeling beat up? Scared? Angry? Frustrated? Confused? Depressed?
Me too.
I thought Tuesday’s newsletter was rough. Just 48 hours later, what looked really bad has turned into a total nightmare. Buckle up!
To be clear—I’ve lost quite a bit of money in this insane selloff. I tried calculating it yesterday, and I’m down something like 75% on my crypto holdings alone. Add in stocks and it’s worse. Yesterday I glanced at my ETrade account around noon, laughed, and decided I won’t look at it again until 2023.
What’s the point? It’s down and that’s that. It’s not worth acknowledging because it’s sad. And there’s enough sad to go around already.
Back to crypto—
The epic collapse of $LUNA and $UST is still being sorted through, and I’ll be honest in saying that that I don’t have all the facts. I never invested in either of those, and didn’t follow it. As a result I got caught off guard when the contagion began. However, the ramifications for the broader market weren’t a surprise given the size of those cryptos and the number of people invested in them.
Panic is funny that way.
People see a popular investment disintegrate and they start to question the entire market. One large thing looks bad so it all becomes ugly. Some sell, lowering prices. Others see the falling prices and decide to sell too. And so the cycle begins and doesn’t stop until the market finds prices it will bear.
Additionally, it stands to reason that some investors in $LUNA also maintained positions in other cryptos and had to sell those stakes in order to shore up cash positions, margin calls, and other losses.
Billions evaporated in the course of a few days.
Now the market is off, people are hurt, and some folks have lost their entire investment. Everyone is left asking why they are here and what is worth their time.
Know what this reminds me of?
The Great Recession.
When Bear Stearns folded back in 2008, fear raced through the markets. It got worse that fall when Lehman Brothers died. Soon enough Washington Mutual failed, followed by countless other banks. Real estate’s bubble popped and didn’t recover for years. Stocks sold off and cash retreated to the sidelines. Unemployment skyrocketed.
Those of us (un)lucky enough to be invested in the market and working at the time still have bad memories about it. It hurt in a way that few things do, in part because it burned up the American Dream for so many people.
Ironically, against this backdrop Bitcoin was born.
The situation is different now, but investors back then behaved the way investors are today. They found cockroaches and decided whole sectors of the economy were bad, disregarding value in the face of fear. Sell this, liquidate that, don’t buy anything. The mob mentality created huge opportunity for people willing to take a position and wait.
At this moment there’s value in crypto too, and plenty of it. But what?
Right now, that value is probably among the bigger names. Bitcoin, Ethereum, and the like. These cryptos have long runways and have held up better in this crash. They have large market caps, and likely aren’t going away.
But make no mistake—this turn to the downside probably has farther to go before it is all over. Get ready for more pain. Get ready for more altcoins to die. And be prepared to see Bitcoin trading at prices that will make many shudder.
Try to remember—it’s only money. Family, friends, and faith are all more important than whatever number you see in a portfolio at a given moment. Numbers change. Always. Don’t lose sight of what’s important in this life.
And please, please, please, make sure you aren’t risking more than you can handle. I saw some dark posts from people these last few days, people who have lost their life savings in this crash. It’s been disturbing and alarming. Give yourself a gut check. We all need to remember— your life is not the sum of your net worth. You are much more than that. Your life has value, and there is always tomorrow. It’s always darkest before the dawn.
Stay strong.
The Crypto Connection is for entertainment purposes only and is not meant to be financial advice. Please do your own research before investing in any asset class. Sara Celi is not a financial advisor, and holds several cryptocurrencies. To purchase her books on Amazon, please click here.