Doc's Daily Commentary

Mind Of Mav

Is It Time To Worry?

 

Global financial markets are in the midst of a major meltdown. Stocks, natural resources, and crypto have experienced one of the largest sustained crashes in recent memory. So is it time to worry? The short answer is “no” but here’s why.

Historical Evidence — The March 2020 Crash

The March 2020 global financial market crash was caused by a combination of uncertainty around the onset of the global pandemic. In March 2020, the Dow had to hit the emergency breaker — which halted trading — three times in the span of just two weeks.

The 2022 crash has been a bit different. Instead of a swift crash, the trend has been a sustained and steady decline. While the 2022 crash is equally if not more concerning, we have to look at how the market has responded to similar events in the past.

One of the biggest reasons not to panic is simply to look at the V-shape recovery of 2020 when stocks and crypto had record-setting rallies just months after the March crash.

Zooming out further, the long-term trajectory of most financial asset classes has always been upward.

The Worst Has Passed… Well Maybe

One possibility is that the market bubble has already burst. While that isn’t a reason for celebration, the reality is that a lot of the selling pressure appears to be alleviated. People who are selling now are likely selling at high losses, which defeats market rationale.

Especially with tech stocks, the negative year-to-date returns have already reached unprecedented levels. Although the fact that previous gains have been wiped out doesn’t ensure a market rally is happening soon, the time to worry about an imminent crash has well passed.

For most passively managed portfolios, it’s not an ideal time to start panicking.

Still Time for a Correction

There are macroeconomic conditions that point towards the unlikelihood of a recession, at least for the U.S. First, it appears that annualized inflation in the U.S. peaked in March 2022. It’s estimated that inflation for April will be only around 8.1%, compared to 8.5% for March.

Second, U.S. GDP growth is projected to be 3.0% in 2022. That’s slower than the 5.6% growth of 2021 but still well above the pre-Covid trend. GDP growth during a true recession would be close to 0% or even net negative.

So What’s Next?

Only time will tell what’s in store for financial markets. 2022 has been a rough year so far. The combination of inflation, declining investment returns, and supply chain shortages have helped paint a doomsday scenario.

The reality is that a major recovery isn’t a guarantee. However, there are signs that the worst will soon be behind us.

The ReadySetCrypto "Three Token Pillars" Community Portfolio (V3)

Add your vote to the V3 Portfolio (Phase 3) by clicking here.

View V3 Portfolio (Phase 2) by clicking here.

View V3 Portfolio (Phase 1) by clicking here.

Read the V3 Portfolio guide by clicking here.

What is the goal of this portfolio?

The “Three Token Pillars” portfolio is democratically proportioned between the Three Pillars of the Token Economy & Interchain:

CryptoCurreny – Security Tokens (STO) – Decentralized Finance (DeFi)

With this portfolio, we will identify and take advantage of the opportunities within the Three
Pillars of ReadySetCrypto. We aim to Capitalise on the collective knowledge and experience of the RSC
community & build model portfolios containing the premier companies and projects
in the industry and manage risk allocation suitable for as many people as
possible.

The Second Phase of the RSC Community Portfolio V3 was to give us a general idea of the weightings people desire in each of the three pillars and also member’s risk tolerance. The Third Phase of the RSC Community Portfolio V3 has us closing in on a finalized portfolio allocation before we consolidated onto the highest quality projects.

Our Current Allocation As Of Phase Three:

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The ReadySetCrypto "Top Ten Crypto" Community Portfolio (V4)

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Read about building Crypto Portfolio Diversity by clicking here.

What is the goal of this portfolio? 

The “Top Ten Crypto” portfolio is a democratically proportioned portfolio balanced based on votes from members of the RSC community as to what they believe are the top 10 projects by potential.
This portfolio should be much more useful given the ever-changing market dynamics. In short, you rank the projects you believe deserve a spot in the top 10. It should represent a portfolio and rank that you believe will stand the test of time. Once we have a good cross-section, we can study and make an assessment as to where we see value and perhaps where some diamonds in the rough opportunities exist. In a perfect world, we will end up with a Pareto-style distribution that describes the largest value capture in the market.
To give an update on the position, each one listed in low to high relative risk:
SoV/money == BTC, DCR
Platforms == ETH, XTZ
Private Money == XMR / ZEC / ZEN
DeFi == MKR / SNX and stablecoins
It is the most realistic way for us to distill the entirety of what we have learned (and that includes the RSC community opinion). We have an array of articles that have gradually picked off one by one different projects, some of which end up being many thousands of words to come to this conclusion. It is not capitulation because we all remain in the market. It is simply a consolidation of quality. We seek the cream of the crop as the milk turns sour on aggregate.

Current Top 10 Rankings:

 

 

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