The Market Is About To Drop - Again

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WHY THE STOCK MARKET HAS BEEN GOING DOWN:

1. NEW ILLNESS

Even though the prognoses seems optimistic…so far….the CONCERN is that we don’t have enough data at our disposal to determine how much of an issue this could be, if it’s more or less worrisome than the existing illnesses, how resistant it proves to be. It’s a whole bunch of question marks that just require further testing and time…and, when the stock market is left to its own devices…it tends to price in the worst case scenario.

2. THE FEDERAL RESERVE TAPER

Up until now, The Federal Reserve assured us that the majority of these price increases were simply due to supply chain and labor shortages, which caused a lack of supply - during a time where demand is increasing.

But, throughout this year - inflation has proven to be higher - and longer lasting - than anyone anticipated….to the point where, now, the Federal Reserve no longer calls it “transitory,” and instead - they want to take quicker action to make sure things don’t get too out-of-hand. In this case, as interest rates increase…tech and growth stocks see a DECREASE, because more expensive borrowing EATS AWAY at the value of future cashflow…and, as a result…they fall.

3. DE-LISTING ON US STOCK EXCHANGE

The SEC just made it clear “that it's serious about delisting Chinese stocks from U.S. exchanges if the companies don't follow its financial disclosure rules.” This was a result of Chinese publicly traded companies, like Luckin Coffee, who was accused of falsifying financials, raising money in the US, and then collapsing once those numbers proved to be unsustainable.

The SEC claims that overseas stocks must comply with their financial disclosure rules, which require they be fully audited and verified on a regular basis to ensure their accuracy…otherwise, they won’t be allowed in the US. The goal is basically prevent a situation from happening where companies report erroneous numbers, US investors buy them up - and, the loss is at the expense of the investors if and when the situation is revealed.

4. BITCOIN DROP

Over the weekend, Bitcoin dropped $10,000…or 17% in a few hours as $1.4 billion dollars was liquidated from the market in a sudden flash crash. CoinDesk explains that roughly 1500 Bitcoin was sold in a single minute…and that triggered a mass selloff event all caused by the ONE issue with cryptocurrency: Leverage.

Coindesk mentions that “Bitcoin Dominated Open Interest has remained above 365,000 for more than a month…this could suggest that the market is currently over- saturated with leverage” - and, when that happens - during a sell-off, we’re likely to see MASSIVE DROPS LIKE THIS.

But, it’s still important just to zoom out and see - on a broad scale…Bitcoin is still up over 150% in the last year…and this is a type of dip that happens on a regular basis, sometimes for seemingly no reason at all. To me, this just comes with the territory, and it’s important that you ONLY invest money here that you’re comfortable watching drop in value. If you have more invested here than you’re willing to lose, it’s absolutely worth it to play it safe and diversify into other investments just for your own peace of mind.

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