#115 - Critical Market Update - Transcripts

November 20, 2022

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The crypto and stock markets are in turmoil. The crash of FTX, the 2nd biggest crypto exchange in the world, combined with the already shaky macro-environment has caused mass fear and panic. Today, we break down everything could be affecting your portfolio over the coming weeks, to make sure everyone is prepared for the next big move.

Transcript

critical market update

this is everything you need to know about the crypto and stock market right now

welcome to the bean pot this is your place for all things stocks and crypto from beginner tips to expert picks use this as fuel for your investing journey because when you're in the know your money will grow this episode the beam parties sponsored by club or swap hi Chris what is it dax index aggregator which is built to facilitate all your defined needs in one single platform fast cheap and safe user experience is copper swaps sole focus to make everyone's life better Indy five welcome to the bean pod this is Shane A. K. the jolly green investor this is Josh the nifty investor this is a critical market update

there's been so much happening as of late we're gonna try to bring you up to speed so you know exactly what is happening in but the crypto and stock market

so it's it's been it's been quite an interesting time since we've done the last market update I mean we thought the markets were in bad shape before and ever was calling for doom and gloom before and then the second biggest cryptocurrency exchange in the world completely collapsed

yes after tax has absolutely **** everybody there's a lot conspiracies going on you're gonna want to tune in to the end is is the US government are they sending money to another country well you know is this what it was this money laundering what it what is going on with S. P. F. and is there a decoupling happening between the stock market and the crypto market now

and then on the flip side if you look at the stock market because what we're gonna cover crypto and stock in this episode there might be some actual good signs in the stock market which could counteract the negative things going on the crypto market and maybe give us like a light at the end of the tunnel so yeah make sure to tune in the F. and the episode because when you get a full diagnosis of what's going on right now

yeah and we have I guess would be a little bit late on providing this update but I think it's important that we digested everything all the information accurate before presenting it to you and putting in a very thoughtful insight into this episode

for sure and and the story keeps unfolding right domino's keep keep toppling over so you know I think by this time everyone kind of knows what happened

yeah

the second biggest exchange in the world F. T. X. has gone bankrupt they were stealing money from their users finally get to their Alameda research company the F. C. T. token went to zero and this is just send massive ripple waves to the cryptocurrency industry if people thought they didn't trust before

now they really don't trust it for those who don't know I. F. T. X. I guess the CEO at the time was SPF and what they end up doing is they created their Ponzi token the FTT token and the use as collateral to borrow and this end up being billions of dollars that could be repaid to actual creditors and debtors and investors so once the coin desk article was released I don't know who leaked it are these rumors circulating around that right now you could see that the balance sheets are off and they had all this money they were owed but then have it didn't actually have any real assets because everything was pretty much in check points

they they were taking users funds that were deposited into F. T. X. sending them to Alameda research right away but I'll meet a research had lost up most basically all the money so it's just fake assets across the board and they knew that what they were doing but anyway

and then C. as CZ that binance guy ended up yelp spreading allow fired and people started withdraw the money credit bank run they didn't have enough assets to cover all the money that was being withdrawn and this led to this absolute critical collapse of the crypto ecosystem

yes so obviously this is you know done a lot of damage to bit coin to crypto to the entire industry and I think you have to agree that this

we've

really sent us into a crypto winter you know people were thinking you don't become is at twenty five twenty two twenty eighteen you know is this is the bottom this is the crypto winter well now bitcoin touched fifteen something the other day and it's sitting around sixteen K. some like that I mean this is this is pretty close it may not be the exact bottom but this is a crypto winter is this what everyone wanted to buy these buy these products to generational prices

you think so so you know we're sitting here right now and this is at its I or might I think when when when crypto it wouldn't decline was sitting at like thirty five thousand people are no way because the twenty nine then officers a strip down to twenty holy **** went down to seventeen downspout copulate no way I can go down to fifty here we are fifteen is there any way I can go down to ten thousand so this is everything we did want but are we get our we dollar cost averaging into anything right now we kinda sitting that way for the dust to settle

I think there's no rush to you know don't go all in right now there's no rush because I don't think things are gonna bounce back anytime soon institutional investors high net worth investors they're gonna be avoiding this market for a good period time right now because of what just happened a lot of really wealthy people just got wrecked yeah and the funds are gone into the onto the Ontario you know working eighteen years to the Ontario teachers pension plan they had like a hundred million F. T. acts as I mean I know that's just a drop in the bucket for them start a hundred mill is still a hundred mil so I don't think there's any rush to to jump all into the crypto markets right now yes you can dollar cost average and I think it's an interesting point something you just said it's like this just happened now and we've we've bounced out of fifteen sixteen K. now this is the second largest exchange in the world that went bust and it's still only brought us just a little lower than where we went at the bottom of the Lou not three S. capital crash

yeah

I mean you could take that as a bullish sign for the industry the fact that we didn't go lower right because second biggest exchange that's a big deal and we only went went from seventeen to fifty K. that's you know fifteen ten fifty percent lower

Jack was off the bat I mean I think it takes a little bit time for the cascading effects to really be felt you know after that terra Luna collapsed it took over thirty days before we start to see a Celsius envoy journalists up before we had another big like down

right

at time of recording this episode were only what night attendees N.

right

so I think there's still another few weeks before more crypto exchanges go under and anybody who is tied to any of these I don't know fake assets that existed and if any of these loans are tied up with no genesis now that's going under and block fire that's going under and I'll made obvious it's going under and after the access like what happens when it gets divulged that maybe crypto dot com has something to do with this or you know some other big lender out there right so Jack

Carter dot com who mistakenly sent like five hundred million dollars in east to the wrong wrong address yeah like what

so what's going on with that is proof of reserves so highlighted that chainlink is one who can put who does these prefer reserve so that investors can feel more confident being on the exchange knowing that Hey you actually hot whatever your whatever you're boring whatever your money now it can actually backed by real tangible assets what these companies are what these are exchanges are doing is they're sending money from one to one to the other so that they can take a snapshot and be like I like we have everything yeah I didn't now shop on the websites okay pretty hot here's the proof for the reserves but then they just send it back right

what a joke although one interesting thing to happen I think it was maybe two or three days ago that kind of solid a little bit of a bounce from everywhere is cesium binance came out and said they're starting this industry saving fund where they can now help exchange is a platform for companies in the industry that need different that need that the liquidity of the cash to cover their the holes in our balance sheet so I think that I mean you know when you are a big player in the space and you see your industry or sector in in dire need of things it's an opportunity right because you can buy business says you can take you can take investment piece of businesses at pennies on the dollar when businesses are struggling so I think he sees that and you know if I trust any centralized exchange is binance they're probably Sturrock with cash and I think now they're seeing an opportunity they don't want to let another exchange go bust he just got rid of his biggest competitor you know gangster move he doesn't really want to see a cascading effect because it negatively affected their business so I think he's seeing this as an opportunity where now he could potentially help out anyone else that's gonna go bust so although I do agree with you that we haven't seen the full effect of the dominoes falling I think now you're gonna see is potentially binance and other big players said look we're gonna help the industry out we're gonna step in if anything else happens

well think about how much money binance would begin losing F. all faith is lost in the crypto crypto industry cesium binance makes money by people exchanging their tokens solve all the numbers are not

as

spices to danger for me he's not gonna start losing money so

yeah

you can need to be careful with how many people are going out of business

for sure yeah you don't wanna see the entire industry collapse if that's your business

in terms of a bitcoin low those interesting that the bitcoin low this year is only the fifth worst bear market history

in terms of what

our word drops off from its all time high before it bounces again so on average reaches eighty five percent from its all time high so a deep in eighty percent downturn would be thirteen thousand eight hundred and eighty five percent downturn would be ten thousand three hundred on that going

yeah I mean I could definitely see those numbers being reached maybe not necessarily this year maybe next year maybe in twenty twenty three we see the ultimate left a big one

yeah

so that that kind of leads us into maybe what else is going on on the other side of the markets the stock market right because if we think that you know you look at the stock markets have been rallying a little bit and we've been talking about a bear market rally in a mid term rally for a long time on the show and you have seen the stocks in certain sectors in the overall market's rally maybe I think it's up ten percent yes and P. in the past month and a half so there is a little bit of a rally going on and we've talked about this many times the number of rallies you see during a recession or bear market it's usually like six or seven rallies and we've only seen two or three so the stock market is potentially leading into a rally phase here now that the mid term elections have passed unfortunate the crypto markets might be left behind because of what happened however there could be opportunities in the stock market

it is possible my only concern with the stock market right now is the fact that we haven't really had a clear cut winner when it comes to you know this is a mid term year mid term election year sucked historically as we covered in our previous episodes we see double the returns after but there's still a lot of uncertainty in in terms of you know who's gonna be obtained the houses in the Senate and all that so I think there's gonna be some stores some additional market turbulence also the fed wants to see the market crash and if we're not going to because now we're seeing CPI the consumer price index common lower than expected which is great the PPIs also come in lower than expected which is great but at the same time the market still repping I think the fed still wants to see that that come down a bit so they may either

a

not have it as quickly as people are going to ex I want it to happen so let's say we're expecting fifty basis points Natwar rally right now than those in the drop the hammer city five

yep

right because I can happen the other thing to factor in is that historically after pivot is when the stock market actually declines anywhere between twenty five to fifty percent after after pivot

so after they it is important the difference between after they talk about pivoting and after they

actually pay that's okay transferring to yet is the actual purpose

yeah

so it's obviously could it's all about sentiment right like water B. X. expecting things are priced in

to the answer

but the actual product itself so when that occurs I would exercise caution because historically that's we also see

a further downside writes that kind of time up with what we're talking about with a rally now and then it goes back down in like early middle next year

yeah

it's funny because you know we're we are more focused on the crypto markets that we are the stock market's although we obviously analyze both but this whole F. T. acting crypto crashes kind of made us forget about what happened with Powell and the fed and the FOMC that was like for three or four days before that'll happen on November second I think it was amber how how hawkish and how you know aggressive Powell's tone was in that conference saying he said they they might end up raising rates more than they thought they would be he said rates could end up higher than anyone thought he said it he said it's very preemptive in too early to even start thinking about a pivot I think you know we were all like kind of digesting that and then after yes collapse we've kind of forgotten about that so while I do think there is potential fuel for a bear market rally we still have to remember exactly we just that you're fighting the fed when you're thinking the stock market is going to absolutely rip from here you know a melt up whatever you think the fed does not want to see that and you do not want to go against the fab just like you didn't want to go shorting against the fed when they're printing money because that just did not work you don't really want to be too aggressively leverage long all in long when you know the fed could drop the hammer at any time

and then what happens is if the see more price index comes in higher than expected you know yup gas prices came down packed it all you know drop the pricing of what if because of our heating costs this winter also we've noticed in November the next reading that comes out it comes at some point eight right now I would actually obliterate the markets

I think there is a good percent good chance of that happening if you think about you know just come to the summer we've gone through some difficulties maybe things are temporarily getting better but we're heading into a winter where Europe in particular is that he has a massive energy crisis food crisis the supply chain crisis is still raging the still geo political risk in multiple areas of the world and there's a lot of things that could happen that could make inflation come back stronger than ever so I think we may have reached a local top for inflation around like that this kind of maybe the end of twenty twenty two but I think you can easily see the CP I inflation numbers coming back above even higher than they were a month or two ago in like February March April and that could be the time where they really put the hammer down and we see that final final drop

yeah

it's something to keep in mind if you like you know the markets are designed to wreck the most possible people so you know if the markets continue to rally from here the stock market in particular people gonna start a formal essay recession over bear market over and as soon as people push all in then the rug gets pulled

one thing I think it's important to highlight is the fact that what they want to see is layoffs they want the unemployment increase and that's what's happening now from some of the major tech companies in the world sixty seven thousand plus Laos have now occurred

it's a lot

however it and that's just the a very small percentage of the layoffs that are coming

yep

so but that is a good indicator that is what the fed wants to see they want to see these last happening because now there's less demand clearly these companies are laying off because it's way less demand Ali Amazon for example has just laid off tens of thousands of people that's right before the holidays

yes hi

that really says something like people are not they're spending as much anymore as to what's gonna end up happening is these businesses are gonna bring down the prices again to bring the consumers back

yeah for sure I mean it's it's certainly not all roses and sunshine out there but I can use we have to keep our our our mind frame in a long term investment cycle here you know we are deep in a bear market now encrypt out in in stocks as well so if you're a long term investor this is where you accumulate those positions that you hold for three four five ten years that you make generational wealth from you know if you look at blue chip crypto projects like poly gone matic whose you know working with every big company in the world or you know Al Gore and are all these ones that have real partnerships with real products rolling out you now over the over the next six to twelve months have an opportunity to stock up these coins are prices you would have even dreamed up twelve months ago you know they're down ninety ninety five percent from where they work and people are still fearful it's people always want to low prices in the bear market until comes and then you're just too scared to buy

one thing I do want to highlight on that point is the accumulation phase and I do believe that you know some stats were referring to earlier on the twenty spaces was

that

rates on credit card debt is the highest it's been since nineteen ninety okay credit card debt is at a record of nine hundred nine hundred thirty billion dollars mortgage rate seven point two percent higher higher than two thousand eight so the average retail investor right now is can actually pummeled just in their everyday life you know you got a grocery store in a cost an extra two dollars to buy a loaf of bread Exeter right so retail is not gonna be piling in and driving these cut their prices up anytime soon

right

what's more is due to the F. T. X. follow I also don't see institutional investors stepping in and to all those regulations the dust has been complete settle and everything is clear and it's safe to pour money back and I don't think we see institutional money come in for a while now

no I agree

so the retailers are dead and the institutional investors are definitely not vesting I think we're gonna have a much longer accumulation phase for the next so once I say is you don't have to go all in right now and you're gonna have many months to beat dollar cost averaging into whatever it is that you believe to be a really good investment

for sure it's it's what we kind of talked about at the start this up so there's no rush this is the definition of a crypto winter so you can set that dollar cost average schedule for every week or every two weeks every month whatever you want to do but just know that you know because I'm gonna have to forty K. anytime soon because the institutional interest the retail interest it's gone so this is you know create a plan create that group of ten to fifteen coins whatever you want if you're looking at crypto that you want to accumulate over the next year plus and if you stick to it I think you can have an opportunity to make some decent gains you know not financial advice obviously but this is now the up you don't get taxes a hundred axes from buying during middle of top global market you get these tax a hundred acts from identifying great projects which is what we do on the show all the time and the discord buying them at their bottom in a bear market dime in handing them spot holding them you know if they follow the thirty percent don't panic sell and wading into the next ball round which might not be until twenty twenty four whatever it is but it's patience and as scary as the bottom a bear market is it's designed to be scary

and this is

this is

a great flash you know this is like you know the dot com bubble this is like the marijuana boom it's like everything in that sector absolutely ripped right you could put money into Yahoo and to ask Jeeves Sir what about your I mean you go girl yeah they already done well in the marijuana industry you could've invested in Telerate iAnthus Aurora it doesn't matter they all went up but winds up happening is you get the two to three that rise to the cream rises to the top so now you have like your true leave which is doing really well in your green thumb so

yep

in this space I think now it's gonna come down to the point where investors are gonna be together scrutinize the projects they're investing a lot more they're gonna wanna see either revenue utility they want to ensure that the team is there so if you're a dodgy company you can't just have these people hiding behind these monkey profile pictures anymore on their websites

yeah

everything needs to be there and I think a lot more due diligence can be put in place by the investors now moving forward which should get rid of a lot of shitty projects I. N. which is good for liquidity because now more money can actually blowing the good projects versus being spread out across twenty thousand all like the skin projects all the me right because all across a lot of all that money it's not a point of the good ones

yeah I mean you probably where it's probably still not gonna happen like as much as we think it will not yes cancel come back yet when when the frost comes back but I'm just gonna say it's a good idea we should do an episode and in the following the following week about how to identify good bear market projects you know like we we've done a surgeon in the past about how to find good projects but I think things have shifted a little bit now where exactly we were talking about like you share that tweet about companies that are actually making revenue than actually have utility so we should do an episode about how to find bear market projects that will survive and do attacks are hundred XL if you really want to check that one out we're gonna be making in the following weeks but I mean like in conclusion I think right now we are in the depths of a bear market there's no question about it we have shady **** going on the crypto space massive exchange collapse bitcoin is in peril people don't wanna thing to do with crypto if you're a long term investor this is when you want to start paying attention this is not the time to go away and stocks the same you know if you look at tech stocks right now things are flying high a year two years ago they're in the pitch right now do you think technology is going away for the world anytime soon I don't so if you really want to build a portfolio this is the time to slowly accumulate things are gonna bounce back anytime soon like Josh was saying but you have to keep a long term mind frame investing and we're entering what could be a very very generational opportunity by amazing crypto stocks so you know just keep your head up

yeah and that's it's it's hard right so we're gonna keep producing content still try to stay updated on everything that's going on in the market

thanks you guys like subscribe and then tune to the next episodes that one is going to be a banger

all views expressed by speakers on the B. potter slowly their opinions you should not treat any opinion expressed in the hottest specific inducements make a particular investment or follow a specific strategy only has an expression of their opinions this podcast is for informational purposes only

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