How The Fed Crashed The Market

By Gary Smith | . | 6 Feb 2022


The market has had a serious deep lately. Many people are confused as to what had happened. Inflation is still high, why is everybody selling? In this article, I'll give you an answer. Judging from the title you probably know who is responsible for this crash. I'll be going over how the fed crashed the market, where it is now, and where it might be for the future.

The Crash

Bitcoin reaches an all-time low since July 2021, S&P 500 down by 8%, tech stocks are plummeting, and ethereum hits a low of $2300. That was a mouth full! Why is everything crashing? Well, there are multiple different key factors resulting in the crash. The first thing that is playing a role would be interest rates. The higher interest rates are, the fewer stocks are worth. This is because of something called the DCF (discounted cash flow). All of the expenses and “overpaying” on stocks motivate people to sell. When interest rates go up, the value of holding safer investments comes much more thrilling, and the first thing to sell off are risky investments like crypto, and people put their money into after dividend stocks and higher-yielding bonds. The next factor is the banks. Banks sometimes lend and even borrow money from other banks. The reason for this is that banks need to meet reserve requirements. Banks can’t lend all of their money out to lenders. If a bank finds itself in a situation where it doesn't have enough on deposit, they need to borrow money from other banks. The federal reserve fund rate right now is between 0–0.2.5%. Why am I telling you this? If you see over a long period of time, if the dollar goes up in value, crypto goes down and vice versa. It's not always the case but over a long period of time, it tends to be true. The cost for banks to lend their money for overnight reserve requirements, and the federal reserve selling their bonds (which increases rates) makes the dollar more valuable. Whenever the dollar gets more value, Bitcoin loses value. The last factor would be how crypto and stocks match. What do I mean by this? I mean that when Bitcoin goes down, typically other crypto and even stocks go down along in a similar pattern. Most people want to diversify their portfolio so people tend to sell off at a major peek to move on a more diversified route. What people want to see is different patterns of growth (and dip) for each different asset. Whew! That was a long paragraph!

Where The Market Is At Now

The growth of stocks and crypto has been fairly good lately. Bitcoin is back up in the $40,000, Ethereum is at around $3000, stocks like Tesla and Amazon skyrocketed, and more! It seems that the dip is now over, hopefully! I have personally been taking advantage of the dip to buy my favorite stocks and crypto I believe in. Where the markets are at right now, I think there's a chance to bounce back even further.

The Future

The future really looks bright. There definitely potential for something to blow up. I'm watching for the big cryptos like Bitcoin and Ethereum, but I'm also looking at fairly small and new cryptos like OMI. Even though the dip, I still bought assets the same I did at the peak. I think people get too scared about things. I understand the reason to sell because scarcity is very powerful but it's unnecessary. I'm excited to see the future of investing. Maybe I’ll be buying virtual land in the metaverse! I'm kidding (i think).

Conclusion

Even if the market crashes, I would recommend holding on and continuing to buy what you would regularly buy (with caution and of course). I made thousands of dollars on the dip and you can too! I see opportunity in every situation. Instead of holding off on the market, I took advantage of the dip to generate even more income. Even if the Fed crashes the market, that shouldn't stop you from trying! Thank you so much for reading all the way through. I know this was a long one. If you enjoyed please leave a clap and comment, it's the best thing you can do to support me. Check out my store here>https://strategy-4.creator-spring.com/. Have a great rest of your day!

How do you rate this article?


9

0

Gary Smith
Gary Smith

I'll be blogging about finance, hobbies I enjoy, and trending topics.


.
.

.

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.