🚨 Everything is crashing. What's next?

GM everyone. This is 2036.

Here I was, thinking I could get a quiet vacation.

But then…

• ETH nukes -20% in a day and Bitcoin falls below $50,000

• The Japanese stock market has its worst trading day since 1987

• One of crypto’s largest trading firms (probably) blows up

… so here we are again.

The big problem right now is Japan 🇯🇵

For decades, Japan has held interest rates at 0. However, Japan is resource-poor and needs to import most of its goods.

A zero-interest rate policy made the Yen weak, as investors sought returns elsewhere (like in US government bonds).

This made it increasingly unaffordable for the Japanese to buy foreign goods.

So last week, Japan raised its interest rates to 0.25%.

As a result, the Japanese Yen has spiked over 10% in value relative to the US Dollar… in just one week.

Now - this may be (temporarily) good for the Japanese, but it’s a death sentence for those who borrowed in Yen to buy non-Japanese assets - like US stocks or crypto.

Suddenly, their debt is more expensive to pay back, and has a higher rate of interest. No bueno.

This has led panicked investors to sell their borrowed assets and buy Yen to pay back their loans, sending the Yen even higher - and making the problem even worse.

As a result:

• Japan’s stock market has suffered its worst daily losses in nearly 40 years (-12%)

• risk assets around the world are tanking

The Japanese Yen was the world’s piggy bank for a while… and that seems to be ending.

We don’t have all the information yet, but it also seems that a trading firm heavily involved in crypto (Jump) is winding down and has been dumping millions of $ of ETH every day for the past two weeks.

And, of course, there’s the growing conflict in the Middle East weighing on everything.

Ok - so does this change anything?

No.

On days like today, I know it can seem like the world is falling apart.

But corrections are perfectly normal. 

They always come when you least expect them — and in shapes you hadn’t anticipated (or else they wouldn’t be a surprise).

But when in doubt, zoom out. 

Crypto will make new all-time highs again soon. We’re still in a bull market, and the macro backdrop is still positive this year.

The lower markets go, the more likely central banks - including the Fed - will intervene. When that happens, we resume up-only.

Remember the COVID crash? It was brief and followed by unprecedented growth in all assets - including crypto.

The time to sell is not when everyone is panicking.

Instead, it’ll be when everyone thinks crypto can never go down again.

Right now:

• there’s been $1 billion+ of liquidations in crypto

• Robinhood is down

• stock markets have halted trading

• news headlines are as pessimistic as they get

… which means we’re getting closer to the bottom.

We may not be fully there yet, but the time to buy has always been when there’s blood in the streets, even if it’s your own 🩸

If you have no new cash to deploy, then do nothing.

These shake-outs are difficult to endure but are part of the process. Volatility is the price you pay for high returns.

So:

• don’t let temporary dips weigh too heavily on you

• don’t use leverage

• zoom out

… and if you can - buy the dip.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.