Sam, a stock and crypto investor, suggests being prepared for worst-case scenarios in the crypto market, as FTX files for Chapter 11 bankruptcy. While the stock market is racing high due to changing inflation, there are fears that the Fed might continue to raise interest rates aggressively, which could hurt both crypto and stock markets. With a lot of Bitcoin coming out of miners, many may default on loan payments, which could affect the crypto market. Sam advises withdrawing crypto from exchanges to be prepared for the worst case, having spare money on the sidelines, and being ready to sell when the next bull run occurs.
The Current State of the Stock Market and Cryptocurrency
How’s it going everyone, it’s Sam. We had another good day in the stock market yesterday, but I think we kind of have to get ready, or at least we should try to be ready in case we have worst-case scenario happen for crypto. I want to talk about that today and what that looks like and why we should be getting ready for it just in case it does happen.
The Crypto Market Today
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The overall crypto market is down a little bit here today. We have just about two-thirds of a percent down. You can see what everything is doing here: AVAX down 10 percent, Maker down 11, Nexo down 11, Kucoin down eight percent. A lot of the crypto exchange tokens take a pretty significant hit. Even Finance tokens down four percent.
The State of the Stock Market
The stock market is doing well because of inflation changing. We had inflation coming lower than expected, and this is something that we’ve been talking about on that channel a lot. This is why I’ve been talking about how I’ve been dollar cost averaging into stocks and crypto because I knew that this would eventually change, and we would see these asset prices probably go up because of the fact that we will eventually have lower inflation.
The FED will have to stop raising rates now because of FTX debacles. This kind of ruined crypto pumping up crypto, and Bitcoin would probably be at around 25k today if it wasn’t for FTX. However, the FED still needs to raise rates to be able to kind of quarrel the inflation. We could definitely see a market drop if the FED doesn’t come out a little bit softer on raising rates in the future, a little bit more dovish, and this could hurt the markets, not just crypto but also stocks.
What Could Happen in the Future?
We have to get ready in crypto because if that happens or if Bitcoin just continues to fall, we could see miners continue to sell, and that obviously could affect the market as well. There’s still a lot of Bitcoin coming out of miners; they’re still selling a lot, and part of that is just because they need to pay for expenses, and they realize that there’s a lot of volatility that could happen because of what happened with FTX.
A lot of miners have been selling and may go bankrupt and default on loan payments, and that obviously could affect the market as well, with a lot of Bitcoin miners going up. It could definitely cause some selling pressure on the market.
How to Prepare for Worst Case Scenario
Just know what’s happening, what could happen in the market. Second of all, just putting yourself in the best position to capitalize on this so withdraw your crypto from exchanges as much as possible. You can still use exchanges, but then withdraw it; you want to use them as an exchange, not as a bank.
Just get ready for that in case of the worst-case scenario, and then also just have some money on the sidelines. Whether your dollar cost averaging like here you can see over the last five years, if you’re dollar cost average, you’d still be up to 0.5 times what you put in. So, be ready to sell as well.
The next bull run, I think a lot of us will be a little bit more cautious by the time that new people come in. Then that’s probably when you’re going to want to start thinking about selling or where you start selling. Just be ready for that as well.