Market Crash Begins | How To Prepare

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The market crashed last week including stocks, and especially crypto. Why did that happen? Before we understand why, we have to look at something else.

HOW DO WE MEASURE THE RECOVERY?
How do know the economy recovered? What matters most is not stock, crypto, or real estate portfolios. What matters most is people getting back to work.

JOB NUMBERS:
Our unemployment rate went down from 4.6% to 4.2% - that’s good, we want unemployment to go down. Analysts expected 535,000 jobs to have been added in November but it was a huge miss because instead we added only 210,000 jobs. How is the data so mismatched?

HOUSEHOLD SURVEY vs ESTABLISHMENT SURVEY:
The household survey is measured by the Census Bureau and it collects data from people about their demographics, their employment status, their profile, etc.

The establishment survey is measured by the BLS the Bureau of Labor Statistics and it also collects data from people. Where the two are different is that the household survey takes into account farm workers, the self employed, people on unpaid leave, and people are counted only once if they work multiple jobs versus the establishment survey which counts people with multiple jobs if they appear on multiple payrolls.

UNEMPLOYMENT RATE vs PARTICIPATION RATE
The Participation Rate is used to measure the percent of how many people are in the labor force. We want high participation with low unemployment.

The unemployment rate is used to measure the percent of how many people are out of a job in comparison to the whole labor force - we want this number to be low.

The establishment survey tells us only 210,000 jobs were added - that’s the smallest increase in almost an entire year - but the participation rate from the household survey shows us that participation actually increased from 61.6% to 61.8%. Which actually means there was a net change of 1.13 million jobs. This means the recovery is happening much faster than the media tells us sometimes.

WHY DID THE MARKET FALL THEN?
Bitcoin fell to $42,000 , Ethereum fell to $3,575 and the market got scared. The biggest reason for the sell off is liquidations in the derivatives market (futures market) over fear of the new variant, and a hawkish Fed.

On December 3rd, the day of the crash - we had a total of $23 billion dollars in aggregated futures interest. Aggregated means fancy it’s taking all the data across multiple exchanges and it combines them into one. Those contracts were then liquidated all the way down to 16.92 billion - that’s a huge drop.

BUT WHAT TRIGGERED THE SELL OFF?
A combination of reasons. One possible reason is another spot ETF was rejected last week, selling for the holidays seasons, and tax loss harvesting.

TAX LOSS HARVESTING?
Investors tend to sell off their losing assets to accumulate tax losses which they will use to offset their income. When people sell to "realize their losses", the price of an asset falls.

HOW I’M PREPARING FOR THE MARKET CRASH:
Watch the video and enjoy!

*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.