Right now, crypto is taking a hit, but also the market exchanges (stock)

Right now, crypto is taking a hit, but also the market exchanges (stock). I have literally spoken about why this is happening in the market (Bear With Me: What The Hell Is A Bear Market And How Do We Survive It? (publish0x.com). But for a quick review interest rates due to inflation (the printing of money) and market sentiment. The summation of all things in the market and crypto are based on supply and demand. Supply is how much of a thing there is, and demand is how valuable is that asset. Think about the previous sentiment for crypto "it's going to the moon”!!! or hey those new shoes drop, and you see a line or most recently Black Friday/Cyber Monday sells.  What does all this entail FOMO, fear of missing out.

I’m here to tell you the markets and I believe crypto is not going anywhere. Missing out can sometimes be a great thing, knowing when to buy an asset is better than following everyone’s else trend.  With that being said, I want to write about market trends and why it’s important to understand.

History of Money

I recent seen a post by someone after the FTX craziness, which I’ll write about later. The post stated “This is why you should never invest in “fake” money”. I thought to myself but isn’t all money technically fake, like an asset is only real or used if its valuable, right? But let me explain why I believe this, to do that I need to explain a brief history of money.

Money or current money is essentially paper notes that the government can continuously print (inflation). Before paper money was made, our money was backed by gold or what some called the “gold standard”. As you know typically in bear markets people utilized commodities such as gold to hedge against inflation. Why? Because it cannot be manipulated or printed. Of course, there are negatives against utilizing just gold such as supply and demand, gold cannot keep up with demand, like paper notes today. Therefore, the government moved away from the “gold standard”.

Supply and demand trumps everything and to keep up with that demand the government must print or not print (increase interests’ rates) and now we are currently experiencing a recession due to needing to stabilize the economy. Back to proving my thesis (or not) if money can just be printed isn’t that essentially “fake”? Now, I know you are saying that it is backed by the banks, but ok. To explain more about this, the term “fiat” is literally not backed by anything it is not tied to commodities and is created by the government.

Why Crypto is Valuable

As stated, money is infinite meaning there is really no cap to the supply and demand. Therefore, you see our Federal Open Market Committee or FOMC raising interest rates or lowering interest rates, it is based on the need of the economy. Whereas crypto is finite, there is a maximum supply and depending on market sentiments there is a demand. So, most coins will have a limited amount of supply. Now you must be smart about how you invest and protect yourselves (Secure Your Keys!! (publish0x.com)). I still believe in BTC, ETH and XRP. Of course, do your own research on what you want to invest in and be wise about it, there is still money to be made. Which brings me to my next subject market trends.

What are Market Trends and Why does it Matter

Market trends are so valuable. Market trends help smart money know when to invest. You and I are retail investors, smart money plays with our emotions and knows when to buy and when to sell. We see something pumping and we ride it out until there is nothing to ride anymore and then lose money. This happen with me, Peloton, it pumped but I didn’t dump it, oh well, you learn more from your mistakes anyway. I highly recommend this book “Charting and Technical Analysis”, by Fred McAllen, it will go more in depth of what I am going to explain.

Trends of the Market:

Chart explains the phases of the market. Hope you like my drawing.

The primary trends seen in the market are accumulation phase, public participation, distribution, downtrends and back to accumulation phase. Accumulation phase is when the market is now at a low or bear (downtrend) market level, this is the first stage of a new bull (rising)market. Smart money is buying now, this is really when the phrase “buy low and sell high”, comes from or “blood is in the streets”. What retail investors usually do is wait on the sideline and miss the opportunity to buy assets on sell. The smart money is waiting on the public participation phase.

Public Participation phase is the advancing market this is when everyone is onboard, think when we were going to the moon, the economy looks promising the demand increases. Smart money rides it to the top. Then in the distribution phase people believe the market will continue to rise and hold on, but smart money is selling to retail investors, taking in profits at a high. This is when you hear people state that the market is going “sideways” there is no growth and no real loss but its most likely the time to get out. This explains an advancing market. Now we are in a declining market, it is really the reverse.

Conclusion

This all matters because this will help change your psychology when you hear the word “recession” or are losing money in your broker account. All markets go up and down, it is about when you want to buy and when you want to sell. These phases work for all assets, the stock market is based on the sentiments of the people buying and selling or supply and demand. Longterm investing is about buying low and holding, but you still should take profits and invest back in that share or digital asset, keeping your average cost low. What is considered valuable is based on what people deem so. Furthermore, most of your money is made in a bear market, be contrarian to the market sentiment, I am not a financial advisor this is for entertainment/educational purposes only. All The Best, #WAGMI #DYOR