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Strong Stock Gains and Crypto Currency Chaos

Strong Stock Gains and Crypto Currency Chaos

November 15, 2022
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The market moving news last week ranged from midterm election outcomes to the crypto currency exchange bankruptcy and included lower inflation reports. It all led to a super charged stock market rally on Thursday, Friday, and spilling into this week. The huge one-day stock market gain on Thursday was one for the record books, with the Nasdaq gaining 7.35%, the 14th largest one-day gain in its history.

Although one day of large gains does not make a trend, it did continue to propel the market higher off the mid-October lows. Many professional money managers believe this climb is just another bear market rally (a short up-move during a bear market) like what happened in March and July, which will be followed by another leg down. This scenario is certainly plausible, and a reversal could happen in the 4100 to 4300 range of the S&P 500, which is currently sitting at 4025. The other scenario however, is that this rally is sustainable and the first step to regaining the previous market highs of a year ago.

The spectacular bankruptcy of the crypto exchange FTX caused a domino effect and many crypto currency prices plummeted to multi-year lows. The drop in confidence of crypto currencies as an investment may have been a factor in the stock market rally on Thursday, as investors possibly dropped cryptos and reinvested in more regulated investments such as stocks. The chairman of the SEC (securities and exchange commission) which is responsible for regulating securities and protecting investors has repeatedly warned investors that crypto currencies and exchanges are un- or underregulated and investors should proceed with caution. From my perspective, it’s important that investors understand crypto is a highly speculative investment that’s also technically challenging to invest in. When crypto currencies first came out some people did make huge fortunes, but history shows that once every single person is aware of that fact, the speculative bubble has already popped and the easy fortunes are long gone. This doesn’t mean that crypto currencies aren’t useful or won’t be used in the future, but the bubble days may be over – remember the dot.com bubble of the late 90’s?

I’m here to answer your questions and discuss your thoughts. What’s on your mind?

Photograph by: PhotoPum RanaRoja on Unsplash

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