The Crypto Winter Is Coming

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WHAT HAPPENED THIS WEEK?
Gone are the days when you can yolo all your money into Dogecoin and become a millionaire. Gone are the days when you missed Dogecoin and you could put all your money into Shiba Inu and become a billionaire. Now are at the days where CNN recommends you forget the password to your 401Ks. This was a crazy week!

WHAT IS THE CRYPTO WINTER?
The crypto winter is defined as a drop in asset values for a prolonged period of time and since we lost over a trillion dollars worth of value in the last week alone, and Bitcoin is down over 50% from its all time highs - we fit the definition. There’s also talks of an immediate executive order from the President as early as February which is supposed to give congress more clarity on regulation with crypto (Bitcoin, Ethereum, stablecoins) this creates rumors about stable coins and taxation and it sounds scary so markets drop.

HOW LONG WILL THIS LAST?
We have to look at corporate earnings. Earnings came out this week and the whole market was waiting for tech stock reporting because tech stocks drive growth - we look to tech stocks to see how well the market is going to do. Investors were afraid that if tech did well - Papa Powell would come out on Wednesday - and increase interest rates early. Thankfully he did not but they will soon.

WHEN WILL THE FED RAISE RATES?
The Fed will buy more assets next month in February ($30 billion worth) and stop in March. At which point the Fed says they will raise rates. So far the market has priced in 4 increases (each being .25% for a total of 1%) to the Federal fund rate. The federal fund rate is the cost of borrowing money from each other.

WHAT HAPPENS AFTER THEY RAISE RATES?
Goldman Sachs estimates that by June of this year, the Fed will start to sell off its massive 8.8 trillion dollar balance sheet at the rate of $100 billion a month.

WHAT HAPPENS AFTER?
Bond prices will fall and their rates will fall. More risky assets will fall in price.

WILL THERE BE A RECESSION OR MARKET CRASH?
Watch the video to find out my thoughts

*None of this is meant to be construed as investment advice, it's for entertainment purposes only. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.

SOURCES:
https://www.youtube.com/watch?v=sX85IhCIhuE
https://www.federalreserve.gov/newsevents/pressreleases/monetary20220126c.htm