My friends start texting me out of the blue why their investments are doing so bad and everything is down. The stock market is down. The fear and greed index is at an all time. Low bond yields are down, crypto is more than down its underground, with bitcoin hitting below 30 000 for the first time in a long long time. So in todays video i want to help explain what the heck is going on in the markets, because it is this kind of market thats going to turn investors into traders. This is what weve been preparing for, watching all these youtube videos telling us the dollar cost average and stay the course. This is the kind of market thats going to test your will to not lose money and its a reminder that sometimes its times like these, where theres not much any of us, can do to run away, but just wait until the pain is over and im right. There with you, because all of my investments are down substantially. Let me just show you so far this year i am down close to 16 and ive lost close to 100 000 worth on paper, mostly thanks to coinbase and im, not even exaggerating, i am down close to 86 on this one stock alone. Imagine investing 70 000 of your hard earned money into something and then watching it magically wither away into less than 10 000 youd. Probably cry be right back the lesson i learned from this one stock is not to chase the hot new and exciting thing in ipos.

Even though i believe that coinbase will come back and its a great company, i just wish it didnt. Take me seventy thousand dollars to learn that lesson, but it did so here we are now. Let me show you my crypto portfolio, which is so much worse here. It is this number used to say 1.2 million dollars so im down over a hundred percent on my crypto portfolio. The only thing thats not down is real estate and thats only because real estate moves really really slow, but the pain is coming there as well. So thats whats going on and i know i seem way too happy considering the circumstances, but the reason that i dont let this affect, how i feel and how i invest is because i try to understand why this is happening now. I cant sit here and tell you whats going to happen next, because i cant predict the future, but i can show you historical data that shows what happens in times like these, because the more we understand why this is happening, the easier it is to continue investing And staying the course so lets get right into it. Hi my name is andrey jic, hope, youre doing well, come for the finance and stay for the crash, so heres the explain it like im five version of what happened this week. This story started two years ago. So lets rewind, we got a global pandemic, people were let go and we were given the elixir of revival to boost the economy.

We dropped interest rates to zero and we began a two year party, where we partied a little bit too hard speculative tech stocks started to go into crazy valuations companies that werent even making money yet had crazy stock values. Nfts that were extremely speculative were sold by the dozen people were spending over a million dollars on pictures of a pet rock real estate, went to over four hundred thousand dollars for the average home and crypto went to the moon. And now that we realize that this party cant go on forever, the buzz is starting to wear off and now were seeing, who partied a little bit too hard and thats the explain it like im, five version of how we got here now. Let me give you a little bit more of a technical breakdown of what triggered this week to actually happen. One of the reasons is because we got cpi data the consumer price index, which is the thing we used to measure inflation and economists predicted that we would have 8.1 percent inflation, but we got 8.3 percent. Instead, it was rent food, new car prices and airline tickets. That contributed the most to inflation. Now, whenever this kind of thing happens and inflation data comes out, theres two ways to interpret that theres, the glass half full and the glass half empty way of looking at the data, some people look at 8.3 and say this is good because last month the reading Was 8.

5 so weve hit an inflection point. 8.5 was the highest and now were finally starting to come down. The worst of inflation is behind us. This is good. The glass half empty approach looks at the data and says wait a minute. Eight point: three percent is still ridiculously high. We want inflation to be anywhere between two to three percent on average per year, not eight point three percent. In fact, if we look at the popular core inflation metric, which takes out food and gas prices, we were 0.3 percent for march and 0.6 in april. Double that so theres actually no guarantee that weve seen the worst of inflation. It could still very well get worse. So we could look at that and say thats, one of the reasons why the market is going down, because when we get high inflation data it reinforces papa pal to step in and increase our interest rates which cools the economy down so thats. One of the technical reasons why stonks were selling off heres what happened to crypto bitcoin is falling and the fear and greed index is pretty much broken. So if youre new to crypto welcome to crypto where nothing is ever stressful and he is only 25 years old. Now is one of the best times to get started and if youre a veteran in crypto, you know that the best time to buy bitcoin is when everyone is scared and thats. Why im so excited to tell you about todays sponsor, i trust capital.

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So sorry for talking about them. For so long im, just so excited that you can finally put bitcoin inside of a retirement account to let it grow 100 tax free, so go check them out and dont forget to grab your 100 funding bonus when you do using the link down below now. Lets get back to it. One of the reasons why crypto crashed is partially thanks to a project called tara luna, which is a stable coin project whose value was pegged to bitcoin and tara was always supposed to be worth one dollar, its pegged one for one and one of the reasons, and One of the ways it keeps its dollar status is by relying on another crypto called luna, and the promise is that you should always be able to exchange one dollars worth of tara for a dollars worth of luna and vice versa. So luna was used as a price shock absorber to keep the volatility stable for tara at one dollar heres an example of how this could work. If terra ever drops below one dollar, you could spend a dollar to get a dollars worth of tara, to convert immediately into luna and get more than a dollars worth of luna for instant profit, and the reverse is true: if terra goes above a dollar, you could Buy a dollars worth of luna and convert it into terra and get more than a dollars worth of tara for instant profit. So it used both of these currencies to keep each other stable, and this system actually works as long as people have faith in the system.

But if they dont and they start to sell both, you get whats called the dreaded death spiral. This is where the value of both coins goes down, because each of them has a negative selling pressure on the other and they both erode each others. Values into nothingness and people stop doing this arbitrage technique because they dont trust the system and they dont want to lose more money now theres an amazing analysis by on chain wizard, which describes exactly what happened, but it turns out. There was an attacker and the attacker spent 350 million dollars worth of ust to drain the liquidity pool and make people panic thats when trades were frozen and was at that point the attacker spent another 650 million dollars to offload all that money on binance and people Really started to panic because it de pegged the value from the dollar all the way down. It was at that point that bitcoin needed to be sold off to maintain the value of that dollar and to keep the system stable, so thats, partially. One of the reasons how bitcoin went from 42k down to 31k, because bitcoin was used as collateral to keep the whole system stable its pretty crazy. What ended up happening but thats, not even the craziest part. If the attacker covers their short position and buys bitcoin back at 32k, they could profit something like 800 million dollars from this attack. So even though bitcoin wasnt directly attacked, it was indirectly affected, because this system relied on bitcoin to keep it functioning and thats.

How this utopian dream that is defy, which is the promise that we could run the financial system in a decentralized way, was attacked, and when peoples faiths are shaken, they sell out, they get scared and the value goes down so thats what happened now. Let me share with you some more market data that shows that this market could get a lot worse from here. Theres, two main things. I want you to remember after this video theres, something called qe which is quantitative easing. This is the infinite money glitch. This is where the money printer go and then theres qt, which is quantitative tightening, which is where the money printer go and it sucks up all the money. Now, whenever the stock market falls, investors like to look at papa pal for help, and they hope that he could lower interest rates to stimulate the market again. But ever since the 2008 financial crisis, weve actually had four periods of qe quantitative easing and every time we did that we experienced the largest average monthly returns in the s p 500. During those accommodative times when papa pal was nice. In other words, the market loves when hes helping and it hates when hes. Not. If you look at all the times, weve had quantitative easing youll see the stock market is always positive. When we have periods of quantitative tightening like the three month period from october to december 2018, we lost almost 14 in a short three month period, so come june.

First, papa powell has told us thats going to be the start of the qt period, quantitative tightening when the fed will start to unload its portfolio of assets and thats when the markets not gon na, like that and based on this historical data, the market will probably Go down even more so just expect the worst and be prepared for it. This is not the end of it. Thats. Also, why in the fedwatch tool website its backing us up, because this year, we will have five more fed meetings, where the fed will increase our rates anywhere between a quarter to a half a percent which theyve already done at the beginning of this month. They raised it by half a percent which was the biggest increase in the last 22 years. Once again, the market does not like that, and it goes down so thats june 1st, so just be prepared, thats whats going on, and now let me leave you with some words of encouragement and i hope these help, according to a bank of america study, if you Were to put in ten thousand dollars in the 1930s its estimated that by today you would not be alive, so everything is about perspective. Just be grateful. Just kidding thats not what i was going to say its estimated that today you would have over 1.78 million dollars, which is 17.7 000 return its just insane. But if you were to miss the markets 10 best days for every decade today, you would only have twelve thousand eight hundred dollars after almost a century worth of investing now heres whats crazier, according to a study by jpmorgan, six of the markets 10 best days come Within two weeks of the markets 10 worst days so now more than ever, the data suggests we should stay invested in the markets, because missing even just a small amount of time, could give us really really bad results.

Now, as for crypto, some people have suggested to look at the yearly lows instead of the yearly highs for perspective. For example, in 2019 bitcoins low was closer to 3 400 in 2020. It was closer to 5 000. in 2021. It was 28 000, so 2022 could be a lot lower. It could be 15 000, but even if thats the case bitcoins run has been incredible and it will continue growing at an insane pace. But this is a reminder that it wont always do that and thats fine, because times like these, which hurt, which are not fun, are a necessary part in keeping the economy healthy. So use this time to master your own emotions, because if you can do that, you will beat most investors just by doing nothing except smashing the like button and watching my silly youtube videos, as always, have a wonderful rest of your day smash the like button subscribe. If you havent already go grab up to 250 worth of free bitcoin with this link right here go check out, i trust capital grab, your free stocks links are down below and then go track them automatically with a spreadsheet link down below. In my patreon love you thank you so much for watching this video. I will see you back here on monday and friday.