The Stock Market Bubble is HERE!

For those of us who check crypto prices dozens of times a day, it can be easy to forget that other, less exciting markets also exist. But they do and, when it comes to the stock market, things there are more interesting than they have been in a long while.

Take the US stock market, for instance. Over the last few years, it’s essentially been propped up by the performance of the so-called ‘Magnificent Seven’ - Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia and Tesla. And, in recent months, Nvidia in particular has ridden the wave of AI hype to become the third-largest company in the world.

However, what goes up must eventually come down (as us crypto folk know all too well). As the initial mania around AI begins to cool, investors are starting to wonder whether the vast sums spent on this new technology are ever going to pay off. To paraphrase Peter Thiel: we wanted self-driving cars, instead we got told to glue cheese to a pizza.

In today’s video, we take a deep dive into what’s going on out there in the world of mega-cap tech stocks and why that dreaded word ‘bubble’ is coming up more and more often. We’ll examine why the Magnificent Seven have seen trillions wiped off their collective valuation and what it could all mean for crypto.

You can watch that video here.

📈 Crypto Market Forecast 📈

It looks like we’re in for a very volatile week. This is because there are lots of macro and crypto factors that could move the market. On the macro front, we’ll be getting the minutes (summary) of the Fed’s most recent meeting on Wednesday. These could reveal just how concerned Fed members are about the economy, and how likely they are to cut rates in September.

If this doesn’t do the trick, then Jerome Powell’s speech at the annual Jackson Hole Symposium on Friday certainly will. For context, Jackson Hole is a town in Wyoming. Central bankers and economists meet there every year to discuss everything you might imagine. The theme for this year’s symposium is “Reassessing the Effectiveness and Transmission of Monetary Policy.”

This is interesting, as it underscores something that everyone seems to be forgetting about: the Fed doesn’t matter as much as it did, at least not right now. This is because the Treasury has also had a hand in influencing interest rates, at least according to a recent report. Naturally, the Treasury has denied this, but the way it’s been issuing debt makes it very hard to ignore.

For reference, the Treasury typically funds itself with a mix of short-term bonds (or rather, bills) and long-term bonds (or rather, treasuries). In recent months, however, the Treasury has been funding itself exclusively via short-term interest rates, as you can see here. The result is that it has kept longer-term interest rates low, as yields on longer-term treasuries have been low.

If you opened the document linked to in the previous paragraph though, you’ll notice something fascinating: the Treasury is planning on issuing long-term bonds this Wednesday and Thursday. This is significant because the demand for long-term bonds has reportedly been weak in recent sales. If it happens again, long-term interest rates could rise, putting pressure on the markets.

There’s a similarly mixed bag when it comes to crypto factors. It sounds like the Trump Campaign is about to unveil a tokenized real estate crypto project that allows for collateralized borrowing. This wouldn’t be surprising, since the Trump family made its name in real estate. The Trump campaign is also looking for more sources of funding. A new token could do the trick.

At the same time, it seems that some Democrats are starting to pull a 180 on crypto. For example, Senator Chuck Shumer has vowed to pass crypto legislation by the end of the year. It’s a bit of an empty promise for the time being, but it’s still a sign that the tides are slowly but surely turning. This begs the question of which legislation could get the green light.

We think the answer could be stablecoin-related. Besides the fact that the ball already seems to be rolling in the Senate, it appears that both parties are increasingly aware that stablecoins are a stealthy way of subsidising the US government’s spending. That’s because all USD stablecoins are backed by government debt, something that we should all be at pains to remember.

The peculiar thing about the stablecoin legislation tabled in the Senate is that it would explicitly allow stablecoins to be used as a means of payment and settlement. If this clause is included when the bill becomes law, then it would open the door to all sorts of new crypto use cases. It would be particularly bullish for cryptos that have been positioning themselves for payments.

From our perspective, it’s no coincidence that we’ve recently seen payment processors like Stripe announcing they’re adding support for stablecoin payments, or Metamask launching a debit card that’s directly connected to your self-custodial crypto wallet. These players can see the writing on the wall: the US government wants to use stablecoins to subsidise its spending.

Does this mean it's in the interest of the US government for there to be a big crypto bull market? After all, stablecoins are used primarily in crypto. The more that crypto rallies, the more that stablecoins are bought and borrowed. Food for thought…

😔 Crypto Burnout 😔

“A year in crypto is equal to ten years in any other industry.”

If you’ve been in crypto for longer than a year, there’s a high chance you’ve heard this phrase before and you know what it actually means.

We’ve found that people who hear it for the first time often mistake it to be a compliment about the industry. Some even think it means that crypto investors make 10 times the money people in other industries do.

Veteran crypto investors will attest to how that isn’t the case. In reality, the phrase is used (mostly in jest) to acknowledge the turbulence of the market and its effects on the mental health of those brave (or foolhardy) enough to venture into it. After all, unlike traditional stock markets, the crypto markets never close. There’s no respite!

That said, if you’re reading this newsletter in 2024, there’s a high chance you aren’t new to crypto. Rather, if we have our probabilities right, we’d bet that you’ve been in this game for at least three years. And, if you haven’t been around that long, congratulations! – this issue of the CB newsletter will offer you a glimpse into what most crypto investors typically go through during the course of a four-year cycle. For the veterans, this will likely serve as a reflection of their journey over the past few years and hopefully also as a reminder to take a minute and breathe.

We believe there’s no better time than now to introspect. After all, we just saw our first major correction in over a year at the start of this month. If you zoom out on the charts, you’ll realise this was a relatively small drop compared to the ones we saw during the heights of the 3AC and FTX sagas in 2022. Unlike the crash of 2022, this month’s correction was the result of broader economic forces led by the unravelling of the yen carry trade.

Nevertheless, we’ve begun seeing a series of doomer posts and FUD making the rounds on social media platforms. The crypto fear and greed index also hit two-year lows, with the current market sentiment oscillating between ‘fear’ and ‘extreme fear’. To say emotions are running high would be an understatement.

However, this emotional volatility is part and parcel of what it means to trade in the crypto market. Rather, we wouldn’t be surprised to see more volatile swings the closer we get to 2025 – the year most analysts expect the crypto bull market to surge back in force.

In bull markets, investors often find themselves overcome with FOMO as they come across new projects and token launches every day. You’ll either find yourself overleveraging your exposure to the market, or stuck in limbo unable to decide where to deploy your funds (AKA paralysis by analysis).

In bear markets, investors tend to become consumed with FUD as crypto prices seem to have only one destination in mind – down. If it's your first cycle, these negative emotions tend to compound as taunts about the crypto market being nothing more than a scam echo loudly and repeatedly. As you get deeper into bear market territory, you’ll either find yourself leaving the market for good or hesitating to accumulate more due to being unsure of whether the market has hit its bottom.

This cycle of negative emotions is not unique to investors - even crypto builders and founders can find themselves in this dark place. As ‘price-go-up’ becomes the dominant measure of a project’s success, they may find themselves overcome with feelings of emptiness and consumed by self-doubt.

If you find yourself here, it’s usually a sign to take some time off from the market and the industry. Touch grass, as they say.

That said, the common theme for people who fail to climb back out of this dark place is neglect in learning to manage emotions. You need to understand that anyone who has seen real success and *retained* this success in the crypto market/industry has usually treated their journey as a marathon and not a sprint.

You can’t do everything and you don’t need to.

Crypto is still one of the greatest opportunities of our generation, but replicable success doesn’t come in just a day or even a year. While it’s impossible to remove emotions, being aware of how you react to certain situations can help you adjust your actions to manage them better.

For example, if you find yourself panicking with every 5% dip, it’s usually a sign that you’ve invested way too much money than is healthy. Take some of it out. On the other hand, if you find yourself feeling the FOMO with every 5% pump, that’s a sign that you are probably under-exposed. The key is to find your balance.

That said, it takes time and effort to build sustainable habits that help manage your emotions better. The best way to build these habits on your crypto journey is to introduce healthy ‘inertia breakers’ – these are external forces that help you keep engaged with the industry and the market.

For example, this could include finding a job that aligns with your skill set in the industry. As you work with different projects, you gain a deeper understanding of how certain niches work behind the scenes. This external force gives you a form of insiders’ edge, allowing you to identify whether something is a short-term trend or a long-term one.

Another example could be finding a healthy community of friends in the industry to share your thoughts with. There’s a good reason why the word ‘community’ is frequently thrown around in crypto. Having a group of trusted peers to chat with regularly about crypto projects or ideas helps you find feedback and test your assumptions about your investment thesis.

If you have no idea where to find such peers, try going to crypto networking events in your city. Or better yet, try posting your thoughts about the market openly on social media platforms. You can be guaranteed to find both people who agree and disagree with you. The critics will help you create a better investment thesis and the supporters will help you validate your conviction in your portfolio, allowing you to stand by it even during times of market distress.

That said, the point is to do the work in pushing forward meaningful choices, and to take your time in acting upon them. We repeat: it’s a marathon, not a sprint. Don’t let anyone tell you otherwise.

🔥 Hot Deal of The Week 🔥

Right now, the crypto fear and greed index is in the “fear” category. What this could present is a unique buying opportunity because, as Warren Buffet said, “be greedy when others are fearful and fearful when others are greedy”.

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🔮 Video Pipeline 🔮

* Sui Update: What’s Going On?
* Yen Carry Trade: What is it and how can it be relevant to you?  
* Grayscale: Deep-dive into their altcoin trusts!
* SEC Vs Ripple: Lawsuit update!
 
🏆 What's New at CoinBureau.com This Week? 🏆

* Top 6 Metaverse Crypto Projects to Watch in 2024
* 6 Best Chainlink Wallets: Top LINK Wallets of 2024
* MEXC Review 2024: Analyzing Fees and Trading Features
* Ledger Stax vs. Ledger Flex: Which Wallet is Right for You?  
* Evolution of Blockchain Networks: From Bitcoin to Web3

📖 Quote of the Week 📖

The longer the market trades sideways, the more people start dropping out and capitulating. However, it’s not a matter of if things will recover, but when. The question is whether you will be one who capitulates, or one who takes advantage of others’ weak hands.  

“The stock market is a device for transferring money from the impatient to the patient.” - Warren Buffet

Team Coin Bureau

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.