How Does (Hyper)Inflation Affect Crypto And The Traditional Markets

What's up everybody? Welcome back to the Art of Crypto. This is going to be a different style of video. This is going to be a lot more structured than the usual analysis video, but I think this is a good step in the right direction in terms of the future of this channel. So this is going to be a deep dive into inflation because right now, you know, let's just be honest, inflation is. At levels that we haven't seen in decades. So this is going to end up to be a 2-part series because I don't want this to get too long. The first part, which is this episode, is going to talk about how inflation affects the markets as well as crypto. So by markets, I'm talking about the traditional markets— stocks, bonds, indices, you know, whatever. So if you're interested to find out about all of this, make sure you stick around to the end of this video. I promise we are going to get real, real deep about this. And the second video is going to talk about, you know, what you can do about it. How do you combat disinflation and how do you prevent this from getting, you know, from wrecking you? So without any further ado, let's dive right into it. So hyperinflation is already here. Now you might not believe me, and this sounds extremely contradictory, but I'm going to show you a piece of data or a couple of pieces of data to You know, allow you to understand what's going on. Because here's the fact of the matter: nearly 40% of all US dollars were printed basically since the start of the pandemic, and that is not something that you can just simply recover from. Whether the Fed believes that inflation is transitory, or you know it will just go away as the markets recover from this pandemic, something that we haven't seen in the modern day, you know the market's just gonna you know correct itself. You know as demand comes back down, the supply chain fixes itself, then inflation is. is just going to solve itself, it's transitory, there's no need to worry. No matter how much of that that they tell you, I promise you, if you believe that stuff, very likely you're probably going to get wrecked. Because here's the fact of the matter: this chart is showing the CPI for, you know, the historical CPI rate. And as you can see, for most of history, you have hovered somewhere between, you know, on a good— on the good years, yeah, you hover somewhere between 5% and, you know, 1%. or even 2%. So we will just assume that that is sort of like, you know, an ideal level to be in. And then of course you have, you know, outliers where you go up to 10% and even up to 15%. So that's ridiculous. And currently, while the Fed says that we are only at 7.5% inflation, you really don't want to believe that because here's what the Fed does, right? They are responsible for keeping the markets in check. They're not going to share the real numbers of inflation with you if it means that people are going to start panicking. So this entire time, right, like, seriously, this is why I'm saying that the people who believe that, oh, inflation is quote unquote transitory, they're really, really likely going to get wrecked because the Fed says it's at 7.5%. But truth be told, and I am sure you have noticed it as well in the, you know, in the price of consumer goods, that it is not just 7.5%. Right, you're seeing prices go up pretty much every couple of months at this point. And, you know, let's just show you like an interesting piece of data that, you know, will clear this all up for you. So this is from a website called shadowstats.com. Full credit goes to them. I hold no credit for this. So what ShadowStats tries to do is to provide an alternative view on the CPI, on inflation, basically. Instead of listening to what the Fed tells you, they do, you know, an objective study, an objective database study into how, you know, what inflation really is in the markets. And you can see from here, right, if you go back to 2020 when the Fed was saying, oh, inflation is transitory, it's only 2%, or we're expecting it to go to 3%, you can see in that chart itself, right, that inflation was at pretty much 4 to 6% already. Right. And for the record, I'm talking about the top graph, right? I'm not looking at the— I'm not looking at the bottom one. So notice how this has always been ahead of what the Fed says, you know, really is the real inflation numbers. And you can see right now we're hovering somewhere between 11% on the top graph and 15% on the bottom graph. And I guarantee you, this is only the beginning of it, right? What the Fed tells you is just the beginning of it. It's going to get worse. You do not simply recover from printing 40% to 50% of all US dollars in existence in the course of a year. You do not simply recover from that with just a blink of an eye, with just a magic spell. Bam, you know, we're back to normal. You simply don't. So going back there, right, assuming that we are hovering— like, realistically, if we are hovering between 11% to 15%, do you see what the problem is? We have only— since 1950, we have only hit those numbers pretty much like 3 to 4 times. In the course of 70 years. We have not seen these numbers since 1980. Believe me when I say, you know, this is why you want to pay attention to this, right? This is why you want— this is why you're watching this. This is why you want to understand things so that you can prepare for it instead of running away from reality. Once you understand what the real numbers are, you can start working to prepare for, you know, the negative consequences that comes along with such rampant impact, like with such rampant inflation. Right? And don't worry, I'm going to get into the things that you can do to combat this in the second part of this, you know, series. But in this video alone, I just want to focus on what this is, why I think that hyperinflation is already here, and how it's going to affect the markets. Because ultimately, the people watching this channel are interested in investing, they're interested in crypto, and this just falls, you know, right there. I know this is more of a generalization where it's more of a generalized topic where I'm talking about inflation. But as a market participant in not just the traditional markets but crypto as well, it helps a lot to understand the happenings in the traditional market. Because here's the fact, the crypto markets are tied to the traditional markets, right? If the traditional markets are going down, crypto is not going to be performing too well either. So this is why it will be very useful for you to know. And for the record, I use ShadowStats a lot, right? Just To provide like an objective view, an alternative viewpoint as to how inflation really is. Because Fed, again, they want to keep things calm. They don't want people to panic. If they come out suddenly and say that inflation is at 15%, markets are going to react terribly. I'm talking terribly. So that's the justification for why I'm thinking the way I do. So moving on. So what, you know, what does this have to do with me? Well, You as a market participant, right? This is going to be the premise of this video. I'm going to be talking about inflation in relation— wow, that's a pretty good rhyme. So I'm going to talk about inflation in relation to the markets, right? Because most of you here are involved in the markets one way or another. Either you're a trader or an investor. Either way, this is going to help you out, right? It's going to— as a trader, it's going to teach you what to do in highly inflationary times. And as an investor, This is going to teach you as well, like what happens during highly inflationary times and what you can do about it. So how does you know? Start off with the traditional markets because we cannot talk about crypto before we talk about the legacy markets, right? The traditional markets. So let's understand this one first. After this, we're going to get into crypto. But for now, during hyperinflationary times, right? Hyper with a with a bracket, right? As much as you guys like to believe it, or like wouldn't want to believe it. I do think that inflation is hovering near hyperinflationary, you know, rates right now. So this is probably going to come true in the future. We'll see how this goes. In my opinion, it will. But, you know, first things first, you know, growth stocks take a plunge, value stocks rise from the dead. So here is how you differentiate between the two. Growth stocks are pretty much, you know, think of Tesla, think of Amazon. Okay, maybe not Amazon, but Tesla especially, right? It is the definition of a growth stock. where they might not be making the most profit, right? The company valuation— sorry, the stock valuation of Tesla is way, way, way beyond its actual revenue numbers, right? I think the numbers were like 10 or 20 times the PE ratio or something. I don't— I'm not even sure at this point. I don't really follow the— I don't really follow individual stocks in the traditional markets, but this is what I understand from inflation. So Tesla, you know, is the definition of a growth stock where its valuation comes from people's speculations about what its future, you know, revenue is going to be. So if I think that Tesla is going to be growing, you know, 10 times, 20 times in 5 or 10 years, then I'm going to be putting bets on Tesla, right? I'm going to go, I'm going to buy Tesla stock and I'm going to hold it hoping for future rises in in valuation. That is essentially how growth stocks work, right? It is on the premise of speculation. So that's growth stocks, right? And I'll talk about why growth stocks tend to take a plunge during hyperinflationary periods. But let's define value stocks. Value stocks are your, you know, sort of bread and butter of the stock market, right? They are the tried and true, you know, they're very consistent. They might not grow a lot, they might not fluctuate in price a lot, but they They are companies that have a proven track record of being able to make money. You know, stuff like Amazon would probably fall into that category if its PE ratio wasn't that high. So value stocks essentially is just like really boring, you know, pharmaceutical companies, really boring logistics companies, or food, oil, whatever, right? You get the idea. They have— they generate consistent profits, you know, every quarter, every year. And They're the stable ones, right? They're the bread and butter. So, you know, let's talk about why, you know, growth stocks tend to take a plunge. And it's not really so much that value stocks will rise in their valuation or like rise from the dead. It's just that value stocks are not going to be affected too much, right? At least compared to growth stocks. Here's why. When inflation is high, the Fed has to do something about it, right? You can't let inflation just roam rampant and uncontrollably, right? You have to bring it down. And historically speaking, one of the most effective ways to bring it down, and something that the Fed always does, is to raise interest rates, right? Interest rates is essentially the cost of borrowing money, right? But it's more than that as well. I'm gonna talk about that. So when interest rates rise, it becomes harder to borrow money. When it becomes harder to borrow money, investors are not going to be as keen on taking on so much risk by putting all of their money into growth stocks, that historically has had a very high Sharpe ratio, which means high risk, high reward. But that risk, that risk factor means that their investment could go down 50%, just like how Tesla and Facebook and PayPal, you know, all the other, you know, sort of big growth stock companies, the valuation pretty much fell by like 50%. You know, it's almost like Bitcoin at this point. So right now the Fed is threatening or like hinting at a possible interest rate hike in March, which is at the time that I'm filming this video, it's March 1st. So because of this, right, investors are, you know, reacting to the market. If interest rates go higher, everyone's going to start getting fearful of putting so much money into high-risk investments. And that's why during uncertain times, right, the stuff that tends to, you know, go down the first is the ones that are really high-risk, high-reward. Meanwhile, the other stuff sort of just stays where they are. They still go down, they still go up, but for the most part, you know, they tend to perform a lot better than growth stocks. But there are caveats to this and I'll get to that. So again, you know, growth stocks are predicated on future revenue. Yeah, we know that. So, you know, when rates are higher, the future doesn't look promising for growth stocks, you know, because it becomes more expensive for investors to borrow money to put into the growth stocks and it becomes harder for these growth stocks to, you know, show those expected revenue numbers when inflation— sorry, when interest rates are high. And one other reason is government bonds, right? This is essentially a risk-free investment. And I'm not saying that government bonds are gonna do extremely well in hyperinflationary times because honestly, let's be real, they're not. No matter how high interest rates go, you're probably not going to be getting like more than 4% per annum out of government bonds. And that's assuming that you dedicate a lot of money into it. over a long period of time, like 5 to 10 years. So I'm not saying that government bonds is going to be like a solution to inflation. And don't worry, I'll get into the real solutions for inflation that, you know, actually work. But here's the thing about, you know, hyperinflationary times. When interest rates go up, government bonds suddenly become a lot more appealing to investors because it's a risk-free way to, you know, just get some kind of a return, right? It might not beat inflation, but at least you're somewhat mitigating the effects, the negative effects of inflation. And in the same, you know, in the same realm, dividend stocks tend to suffer as well, right? The stocks that give you regular dividends, just because of how appealing bonds can become. But of course, um, and of course, do not forget about quantitative tightening, right? This is like the big reason why I'm, I'm talking about the traditional markets, right? Because this point right here is going to affect not just the traditional markets, but it's going to affect crypto as well. Because here's the thing, the Fed is honestly, right, the Fed, the market makers, they are responsible for, I'd say, like 80% of your daily trading volume as well as liquidity that are driving stock prices right now. And not just stock prices, everything, honestly, right? We're in an everything bubble. Let's just call it that way, right? Stocks are at an all-time high. Index funds are at an all-time high. Bitcoin was at an all-time high. You know, who do you think is responsible for a lot of this? It's quantitative easing done by the Fed. So stuff is honestly, right, honestly, it's just artificially inflated. So I mean, valuations are artificially inflated. So as hyperinflation, as inflation takes hold of the economy, they have to perform something known as quantitative tightening where they have to let go of their assets like stocks, equities, bonds, whatever, right? They have to let You know they have to let them go. During quantitative easing, the Fed is buying a lot of these stocks, equities. You know that they're putting a lot of money into the market. Quantitative tightening, they are taking away liquidity from the markets. So this is a reason that you're going to see a lot of asset valuations start to go down, right? The Fed is one reason. Market makers are going to be another. But just understand that during high bracket hyperinflationary times, markets uncertain. Right? Markets are uncertain, and because it is, people have to reduce their risk in one way or another, right? So these are the reasons, right, why, you know, the conclusion is basically, you know, this is how the traditional markets will be affected. But of course, this is not the be-all end-all. And in fact, I'm pretty sure most of you are not really here for the traditional markets as well. So this is just, you know, to give you an overview of how this works. Of course, I do not specialize in the traditional markets, so might not be the best one to talk about this. So Feel free to just look into this topic yourself. But moving on, inflation is not always a negative thing, right? Here's what I mean. High inflation is, right? But not just regular inflation. You know, mild inflation, as you can— if you've seen from the, you know, the first chart, the first graph, mild inflation, 2 to 3%, you know, it's really good. It allows growth stocks to flourish. It allows the value stocks to continue making money. It, you know, it's just good. For everything basically. And this is where we have traditionally been for most of history since 1950. But as of right now, high inflation, right? Mild inflation is good, it's very good. High inflation is dangerous. So now that you understand all of this, right, let's, let's get into the sweet part. Let's get into the good bit, which is how does hyperinflation affect crypto, which is I would assume what most of you are here for. So without any further ado, you know, let's dive right into it. So first things first, Understand that as far as growth-based assets go, crypto is the most growth-based there is, right? In terms of how risky an asset can be, crypto is as risky as there possibly can be, right? Because in crypto, you go through regular drawdowns of like 75, 80, 90%, and that's normal, and that's something that should be expected. You tell this to a 50, 60-year-old boomer that, you know, has historically, you know, for all his life just invests regularly into index funds and, you know, stock market, into gold and stuff like that, you tell him that your assets will go up and down by 90% 2 to 3 times a year, you know, he would freak out. So this is something that, you know, honestly, if you are a crypto investor, this is something that you deserve a lot of credit for, you know, because here's the fact of the matter, right? Most people would not be able to stomach the amount of volatility that is present in crypto. So if you are a successful hodler of crypto, you honestly, you're doing something that most people aren't able to do. And you got to remember, in a market, 90% of people are losing money, right? There's only really 10% of people that are really making money, or at least most of the money. So I'd say that if you have successfully, you know, been able to just hodl and continue investing and putting money into the crypto markets, honestly, like, I— you don't even need me to tell you how, you know, how much of a high performance that your portfolio has been able to achieve. So, you know, first thing, you know, now that you've understood this part, here's the second part, right? Which is during uncertain market conditions, I'm talking inflation, conflict, plague, recession, you know, highest risk assets, you know, crypto, tech stocks tend to perform the worst. But again, remember what I said earlier, right? You already know this, but remember what I said earlier. There are caveats to this. Crypto has traditionally been, you know, considered as a hedge against inflation. You know what happened to that? Right over 2021, basically crypto has been up and down. You know, you're not really, you know, outperforming inflation. You've been up 50%, you've been down 60%, you've been up 80%, and you're down 80% again. You know what gives? I thought you were supposed to be a hedge against inflation. And you know, Bitcoin has traditionally been heralded as the new digital gold, right? So it doesn't seem to be performing that way, especially if you're a newcomer to crypto markets. But the truth is, honestly, I would say crypto has been one of the best hedges against inflation in history, right? Not just inflation, but just something to outperform many, many asset classes. But the answer is going to be slightly complicated. So let's dive right in. The performance of crypto, right, plotted out over a long period of time, it has actually outpaced inflation as well as pretty much any other asset class, right? Um, any other traditional asset class. I'm not talking about alternative investments like sports cards, like watches and stuff like that. But, you know, compared to just any other traditional market, it has outperformed everything by an astronomical margin, right? And I'm talking about 10 times, 100 times that of how other, you know, assets have been performing. So yes, crypto, historically speaking, has been one of the best, if not the best Hedge against inflation. I'm just going to give you a couple of examples. Of course, I'm just cherry picking these, but I'll show you as well some you know really you know general and consistent just proof that crypto has traditionally been such such a good asset class, right? And it will continue to be an amazing asset class. But I'll teach you how to get there, right? Because not everyone is going to be able to reap the rewards of crypto, especially if they don't watch. To the end of this video as well as if they don't watch the next video. So if you haven't already subscribed to this channel, turn on the notification bell so that you know when the next part two is going to come out. So this is coin. This coin right here is called Terra Luna, right? If you just you time it from like a very random spot near the bottom, right? In the span of 340 days, it's gotten 400x. This coin, I don't remember what it is, but it's probably. probably AVAX, you know, 40x in one year, right? If you just time it from like some random spot in the chart. This over here, right now, both of these are cherry picking. Like, I'm cherry picking these because Luna and AVAX, for those of you who are involved in crypto, you know that these two have been one of the, like, two of the top performers over, you know, this entire 2019 to 2021 bull run. So that's cherry picking. But here's the other coin that you guys might know, might not know of, This coin is called NEO, NEO. And for all intents and purposes, this is not a coin that most people have heard of before. But even the most obscure random coins have gotten 20 to 30, maybe 10x in a year, right? And I don't know about you, but, you know, maybe for crypto people, we are desensitized to anything below, you know, 100x basically, because we see so many of these 100x's, 50x's, that 10x, we just think like, oh, well, whatever, you know, that's a dime a dozen. But here's the fact of the matter: even just with 10x, assuming that inflation is at 15%, right? Worst case scenario, 25%. You're already outpacing inflation by like 40 times, right? Just to put this into perspective for you. Wait, 25%, 1,000%. Yeah, 40. Yeah, 40 times. Sorry, got lost in my in my math there. So you know, even just 10x, which is regular in crypto, like heck. You're getting coins that move 50% to 100% in 2 days, or just in a single day, or in a few hours. There is no reason that crypto cannot, you know, outpace inflation. But again, there are caveats to this, right? Crypto's biggest strength is also its biggest weakness. The hyper volatility of crypto that allows it to achieve its astronomical gains is the same volatility that causes take a look at a chart, 80% to 90% drawdowns. Every few months, this is normal, right? It might not seem that way to you because I'm very zoomed out right now, but all of those down moves that you see in the chart—that's moves of like 50, 60, 70, 80 percent, right? Does not look that way, but from the top, that is in fact the case. So here's what it means for you, right? Like you already know this. So as people in crypto, you know, I might have just stated the obvious, but here's the thing: crypto. It's only a solid hedge on inflation if you understand how the markets like to move. Here's what I mean. And yes, I'm saying that you can outpace inflation pretty easily if you can trade properly while keeping the right concepts in mind. But here's what you need to understand. The market moves in cycles, right? What goes up must come down. And here's why. What goes up must come down. This might not apply too much to index funds and bonds where you see them, you know, basically make— they can maintain pretty much a clear uptrend for better part of the last 50, 50, like 60, 80 years. But especially to crypto, which is such a new, you know, thing, there is not enough history, there is not enough market involvement to keep the prices stable. And honestly, truth be told, with everything that I just said just now about crypto being a good hedge against inflation over the long term, there is a caveat to that as well, because crypto has only had about, what, 9 9 to 10 years of history, of like trading history, especially, you know, you talk about Bitcoin, right? There's not just crypto, you know, Bitcoin. Bitcoin's the only one that has lasted for this long. So you talk about Bitcoin, the oldest one has like 10 years worth of history where like the first 5 to 7 years, like Bitcoin was basically, you know, under the radar where, you know, only a select handful select few people know— knew about crypto, knew about Bitcoin. And it's only recently, you know, rose to prominence, maybe in the last 5 years. And when you look at it this way, you know, it's really impossible to, you know, understand what is going to be the long-term, you know, performance of crypto. But here's like— here's what I think, because again, this might be very biased coming from someone who is regularly involved in crypto. In fact, I'm, I'm full-time in crypto. So, you know, crypto is going to be the future. Let's just say it that way, right? Whether it's in the form of a central bank digital currency or, you know, if some crypto becomes like the main form of payment or whatever, right? Even if none of this happens, right, the use case of crypto in not just, you know, payment, you know, the payment industry, but like you talk about the metaverse, you talk about, you know, digital ownership, you talk about, um, NFTs, right? There's so many applications for NFTs. You talk about like there's so many stuff in crypto that you don't even need for it to become sort of a you know main mode of payment in order for it to you know get that wide adoption that everybody is hoping for. So assuming that crypto is the future, I do think that it's going to perform just as history has. Like it's just going to perform as as it has done in the past nine years, which is really really good. I'll give you the exact numbers, but it definitely I'll give you the exact numbers later. But it is. Way beyond, you know, like when you average it out over 9 years. Heck, even if you average it out over, you know, shorter period of time, 3 years, 5 years, 1 year, you know, it's still outperforming most other asset classes, right? But, you know, I went off, I went a little bit off topic there. But this applies especially to crypto because it does not have much trading history. And more importantly, the market makers account for basically 80 to 90% of daily trading volume. So here's what this means, right? See, the thing about market makers is that they're in the business of making money for themselves. They're not in the business of helping you win, because when you win, they have to pay you out of their own pocket, right? Imagine this: you're trading on leverage. Who are you borrowing the money from? Market makers. When you win, you have to pay you out of their own pockets, right? So here's the nature of crypto, especially if you're a trader. You're going to need to understand very well what these market makers are trying to do, right? You won't hear this everywhere, especially from investing videos, but like investing in macroeconomic factors, you know, videos. But as a trader myself, this is really important to understand. The market makers are what causes these 90, you know, 80-90% swings in crypto. So as long as you understand that, you know, you should be regularly taking profits if you are a trader or if you're more short-term based, right? If you do that, right, again, if you don't take your profits, the market makers are going to take them from you. For those of you who watch any of my previous videos, you understand that I talk a lot about these market maker concepts. So, you know, that's another reason for you to subscribe and like the video if that wasn't obvious enough already. So as long as you regularly take profits, right, from your trades as well as from your, you know, midterm to long-term trades, then you'll be Gucci. In fact, you'll be more than Gucci. You'll be performing really well. You will be outperforming the market basically, at least the traditional markets, right? So this is what I mean by, you know, in front I say that You can outpace inflation pretty easily if you can trade properly while keeping the right concepts in mind. By right concepts, I'm talking market maker concepts. If you can do this, then crypto can become a very, very, very, very, very, very solid hedge against inflation. But again, like with any other investment, there is risk. All I'm saying right now is if you account for the amount of gains that you can get. But in you know in every trader's career, we have went into drawdowns, right? Even investors. Right? In every investor's career, you have historically been in drawdowns of like 50-80%, especially if you're involved in crypto. So, risk properly while keeping these right concepts in mind. Yes, you will very solidly outpace inflation very, very easily, right? But that is for the trader. That might not apply to a lot of you, especially if you consider yourselves investors. So here is where it gets really juicy, because honestly, this is the best part, right? You know, saving the best for last. This is the best part because the thing about trading is you win some, you lose some, right? There is— your account goes through drawdown periods basically. So if you're not a good trader or you do not trust yourself to be a good trader, and again, there are so many things that go into trading properly and with good performance, which includes psychology, you have discipline, you have having a trading plan, risk management, you have to understand the entries, you need patience, you need so many things that go into trading properly. But with investments, You know, with investing in crypto, it's a lot easier. You just got to regularly put money into the market, hodl, and pray. Okay, in this case, I'm going to give you data as to why I think that's going to be a very, very good idea. But otherwise, for a hodler, you know, you simply just hold and, you know, you just buy and hold basically. And I'll show you numbers again, really good numbers, as to convince you that that is going to be the right move for the majority of you, right? So As long as you have sufficient income that you can regularly invest into the crypto markets during times of hyperinflation, this will allow time to work its magic on your assets, and it will show. I'm telling you, it will show. Not if it will show, but it will show its power as a top-performing asset when plotted out over, you know, a period of 5 to 10 years. And now a lot of you will immediately click off this video right now. Wow, what do you mean 5 to 10 years? I want money now. I want to invest money now, and I'm going to get 50% tomorrow. Come on, man. You're a crypto YouTuber, right? You should understand that part. Who wants to wait five to ten years? Yes, I understand your. You know, I understand your concerns, but you know, hear me out. The thing about investments as well as you know, here's the thing about investing in crypto. Yes, you can get you know fifty percent, hundred, two hundred, three hundred percent gains in you know a day or two. But that is you also have to understand, right? How often are you going to get those kinds of coins? And yes, very often. But will you be able to catch those coins as they're pulling those kinds of moves? If you're able to, sure. You know, don't think about, you know, don't even think about, you know, one year, right? You can get, you can make really good money off of just one trade in 2 days. But here's the thing, most people, you see what happens in the crypto markets and you think, hey, you know, it's so easy to make money. How am I, like, everyone can get rich, you know? If you make 50% today, you make 50% tomorrow, you make 50% the day after, you know, who needs Warren Buffett, right? I'm the greatest investor of all time. But here's the situation. Wealth creation and wealth preservation, especially, you know, over a sustained period of time. And I'm talking about a few years here because honestly speaking, inflation is going to continue to affect people 5, 10 years down the line. A lot of people are going to suffer from what the Fed has done during this, you know, as a response to this, you know, pandemic that the world is going through. A lot of people are going to suffer, right? The rich are going to get richer. That's a given. Right? Inflation will allow the rich to get exponentially more richer, right? Just simply in the nature of them, you know, they're going to be making a lot more money, right, in terms of volume because things are going to get more expensive. You know, I'm not going to get into that, but the poor class, like the lower class, they're going to suffer, right? As things become more expensive to buy, they are going to really suffer. And I'm serious. Like, heck, even if you are middle class, right, especially if you're lower middle class, the middle class is, you know, I don't know how to say this, but I'm pretty sure they're going to be some— they're going to disappear over the course of the next 5 to 10 years, especially the lower middle class, because they don't have, you know, they don't have— if your assets are performing worse thanks to inflation, because inflation is 15%, if you're investing in the stock market, let's say that achieves, you know, a 10-year, like 10% return over the course of 100 years, 10% is still lesser than 15% inflation. You're still losing money just keeping your money invested, you know what I mean? middle class is gonna suffer really hard because their assets tend to be, you know, their houses, which has historically been a very good hedge against inflation, but it's probably not gonna keep up with 15% if that actually is the case. You have that and then you have your stocks, bonds, whatever. 12% would be considered an amazing year for the stock market. So you understand what I mean? So when you plot it out over 5 to 10 years, you know, I'm gonna show you the numbers later, but that's when time works its magic, right? That's guaranteed money. At least it's a lot more guaranteed money than if you were to be, actively trying to trade things, you put your money here, there, here in that coin, you invest in that coin. And then if it goes up, you sell and then you sell too early and you regret it. Or maybe you put it into that coin and it goes to zero and you're like, oh my God, why did I put half my savings into that coin? There is so much risk involved. Of course, if you want the high gains, the risk is going to be inherently higher. As a buy and hold sort of investor, risk is gonna be low, But your, you know, the amount of gains that you're gonna get from, from doing that, you know, compared to any other market is like, it's like no comparison, man. So if you're able to, you know, basically if you fall under that category, if you can just keep dollar cost averaging, you'll be Gucci. Heck, you will be much more than Gucci. And I'll show you the numbers right now. Oh, actually, before I show you the numbers, wait, actually, yeah, let's just show you the numbers, right? since I've been talking about it so much. We'll get into how does inflation affect the market, the crypto markets, in a little bit. So this chart right here is just talking about Bitcoin, right? Assuming that since the beginning of Bitcoin you have invested $10, just $10 every day, right? Or $300 a month for 9 years, basically your total amount invested would have been $32,000 to $33,000. And right now you would have about $3.4 million worth of Bitcoin. like the dollar amount of your Bitcoin would be worth $3.4 million. That's 10,000% over 10 years. You average it out, you're still getting more than 1,000% a year. That is easily 100 times, you know, of inflation. And you compare, like comparatively speaking, if you were to have put your money into gold instead, right? For example, you would be up 30%, which is negligible because, you know, every year, like for the last 10 years basically, inflation has been sitting around 2 to 3%, maybe 4%. You're essentially just breaking even compared to inflation, right? And if you have invested in the Dow Jones Index, you know, you'd be up 64%, but after factoring in inflation, you might be up 30%, right? So of course, this is the best-case scenario, but 99.99% of people, including myself, did not know what the hell is Bitcoin back then. So yeah, let's use some more realistic numbers instead of 9 years ago. So this next chart is 5 years ago, which is not too much of a stretch because 5 years ago, it's 2017, right? The peak of the bull market. Assuming that you came in at the peak of the 2018 bull market, right? Assuming you came in at the absolute peak, you would still have averaged a return of 800% over the last 5 years, which is averaged out, that's about 164% a year, which is still, you know, assuming inflation is 15%, that's still, you're outpacing, you know, what other markets can give you this kind of return if you just regularly, and again, regularly invest money into crypto. And this is the power of sort of dollar cost averaging and why so many people talk about just dollar cost average, buy and hold. Most people should not be trading. And coming from a trader myself, and this is coming from a trader myself, right? Most of the content on my YouTube channel talks about trading and how to trade. Heck, I teach people how to trade. Coming from myself, I would still say most people would be better off just buying and holding because in order to trade properly, In order to trade with good performance, you need a lot again, a lot of factors. A lot of factors go into it. You know discipline, you have psychology, you have so many other things. But with buy and hold, it's literally just buying regularly and holding no matter what the market conditions might be. Because I told you already, like in the period of 28, like 2017 until 2022 right now, I guarantee you crypto has went through at least ten times right of a drawdown of like. 50 to 80%. That means you would have seen your valuation of your portfolio fluctuate by 50% in a couple of months. But as long as you continue to buy and hold, this is the returns that you can expect from 5 years, assuming you came in at the top of the 2018 bull market, right? So you do not have to time the markets. What's important is that you regularly space out your investments. You do not put— assuming like in these 5 years, right, you invested $18,000. If you put all $18,000 into Bitcoin at say you know the end of 2017, your performance would be a lot different. I guarantee you right now. So the important thing is you have to dollar cost average, and I'll get into the like for example, for example, right? If someone put in five thousand dollars worth of Bitcoin, let's say at two thousand dollars, right? This is how it's going to go, right? Somebody else puts five thousand dollars worth of Bitcoin, but it's she spaces it out for twelve months. For example, I guarantee you. At the end of the 12 months, right, Person A, because he bought Bitcoin all at one price, maybe he only has 0.3 Bitcoin, right? Let's just assume that. Meanwhile, the other party, because she dollar cost averages, she owns 0.6 Bitcoin. And obviously 0.6 is more than 0.3. So at the end of the one year, you're gonna find more often than not, in fact much more often than not, the person who dollar cost averages tends to get much better performance. So this all only works if you can dollar cost average. And I'm gonna get into shorter timeframes later, but have as much as possible, have a long-term thinking, right? Think 3, 5, 10 years, heck, even just 1 year, right? But be consistent with this. $10 a day is not a lot for most people. Yeah, I don't know about you guys, but $10 a day should be doable, right? It's just $300 a month into crypto and you'll get back a net return of you pretty much 10x your money, right? $150,000 just like that. And of course, if you, if you're saying, you know, you put $50 in, you know, that number is going to be huge, like much bigger than this. That's the power of dollar cost averaging, right? You know, next, you know, we look at my personal scenario, which is I came into the markets in 2018, right at the top of the bull market, like the peak, absolute peak of the bull market. That's when I got into crypto, right? I didn't start dollar cost averaging until about 2 to 3 years ago. So let's just, for all intents and purposes, let's just put 3 years. I put in $50 a day, so I have $54,800 invested until today, right? If I just bought and hold, I would have 500% over the last how many years? 3 years. That's 150%, 160%, sorry, 166% a year returns averaged out over time, which is still mind-blowing, right? Which other market can you tell people, hey, I got 160% every year, year on year. You can't. It's okay. Gold, 18% during that time. DJI, 18% during that time. You've got eaten alive by inflation by then. So again, this is my case right now. You might be thinking, hey, I'm not like you, right? I didn't come into the market so early. I only came in, you know, last year. Again, one year ago, if you would have just started, you know, putting in $10 a day for the last 365 days, you'd be up 17%. You can't say the same for gold. You can't say the same for the DJI. You can't say the same for many other asset classes. Again, this is if you were brand spanking new to the markets, right? You just came in 1 year ago and you started dollar cost averaging. This is the results that you would get. It doesn't take a genius to understand how amazing this is. And more than that, you know, this is only 1 year. Imagine if you just have exercised a bit of patience, exercise patience, continue doing this for another 5 years. I guarantee you, you know, okay, I'm not gonna promise returns, but with the trajectory that the crypto markets are heading, in this world right now with how it is looking more and more likely that crypto is heading for mass adoption, it doesn't take a genius to understand that, you know, these gains are going to be exponentially higher as long as you continue to dollar cost average. Makes sense? If that makes sense, right, I want you to comment down in the comment section investor, because, you know, honestly, that's the best path for most people. And it just shows me that, hey, you have actually taken the time to watch this video until this point. Because I promise you, most people wouldn't have been able to sit through a lot of this, right? But having come through this point, right, it would be great if you guys got something out of this, right? So if you've learned anything or, you know, whatever, you know, let me know in the comment section as well. And let me know if you want to see more videos like this, because this is honestly my first time making such a long format, such an in-depth analysis, such an in-depth video. So if you'd like to see more of this, let me know. So what if, you know, Hey, I didn't even come in 1 year ago, right? I just came in 6 months ago before the crash started. And for those of you who are wondering, uh, what I mean by that, November 2021, Bitcoin was at $69,000, and right now I think it's sitting somewhere in the mid-30s or like $40K, right? So that's a retracement of almost 50% in the course of 3 to 4 months. So assuming you came in right at the top of the market, just dollar cost average, You would still be up. Do you understand the power of this? Just to give you, you know, just to give you an idea of how this works. And heck, this is only talking about Bitcoin, and Bitcoin is the mama bear of all coins. That means that it has the highest valuation. That also means that it is the most stable. That also means, that also means that it does not have that much gains to be had if you, if you just solely focus on Bitcoin. So let's take a look at Ethereum. Right? If you started at the top of the 2018 bull market, right? No, no, sorry, this is— oh wait, I don't think that's the top. Sorry, this is the top of the 2018 bull market, right? You came in just right before the peak, right? 2 to 3 months before the peak of the bull market. You just start putting in $50 in Ethereum every day for 3 to 4 years, you'd have $800,000 out of like $59,000. You know, give it— no, sorry, the amount is written there, right? $82,000 into $800,000, that's 10x almost. It's almost 10x. And Ethereum isn't even at its all-time high right now. Imagine if you were at the all-time high, right? That would be ridiculous. Okay, that's if you came in at the top of the bull market, right? But you know, this is just a random point, right, after the top of the bull market, right? It's been 1 year since the bull market ended. You came in $50 in ETH, right? You still have $600,000. 900%. ETH and other altcoins, right? Imagine if this was Bitcoin, right? Imagine if people were investing regularly in Bitcoin 9 years ago when it was super unknown, nobody knew about it. 5 years ago, Bitcoin was still considered hyper-risky, right? Like, what does Bitcoin do, right? It's just going to disappear. Imagine if people— like, if you see an altcoin that you believe in, Solana, you know, you talk about Near, you talk about Polkadot, Chainlink, Cardano, whatever. You see an altcoin that you believe in, and again, Bitcoin didn't become Bitcoin magically, right? It takes time. It takes time for adoption to come in. It takes time for people to understand its use case. So if you think that a coin has potential to do something like this, just buy and hold, right? Just dollar cost average regularly. And there's a lot of services that allow you to do this, right? You have KuCoin, you have Coinbase, you know, a lot of services allow you to just set, you know, you can just set your credit card, right? And every 12 hours buy this amount, every day buy this amount, every month buy this amount. It will just buy at market and you do not need to time the markets, right? This is the key. You do not wanna be timing the markets. You just wanna dollar cost average, have a plan and just let it run, right? 5 years later, you'll have 10x'd your money basically. And for those people who are saying, oh, 10x your money in 5 years, that's ridiculous. You clearly have not had enough experience in the markets yet. Again, You can achieve much higher than 10x in five years, but I'm just talking here about an from an investor's perspective very much. Right? If you want more gains than that, yes, absolutely possible. Right? A lot of people have done it in crypto, but you're taking on a lot more risk. You I hope you get the gist of what I'm trying to say. So these altcoins they don't just magically become you know they don't just magically have really high valuations. Right? You need patience. Patience is so key. when it comes to investing, especially in, you know, these small-cap altcoins, right? If you can have patience, trusting in your plan, understanding that the markets are going to go down by 80% at any given time, might even go down by 90%, as long as you understand that. But as long as you understand that even though that is the case, even though you might go into like a 2 to 3 year bear market, as long as you keep investing, right, long term, the long-term trajectory plotted out over a 5 to 10 year, maybe more period, is up, you're going to be Gucci. That's really important that you need to understand. If you do not understand that part, right, stick to trading. But if you understand that part, right, there is a lot of rewards that can be reaped on the other side of the equation. So I hope this, I hope this has been helpful to you guys. Yeah, so now we get back to how does, how does inflation affect the crypto markets. I'm sorry that I had to keep this to the last part. You know, we just went with the flow and, you know, we start talking You know, we started talking about you know the numbers. So now you know last topic. I know this video has gone on long enough. It's probably closing into an hour right now, but I'm really thirsty as well. So since crypto is as risky as risk gets, makes sense that it will be negatively affected by hyperinflation, just like the stock market. But as this isn't all set in black and white because as sometimes the markets react to expectations of news rather than the actual content of the news itself. This is what you saw during November to March. So here's Here's here's the situation. Back in November, I think the Fed announced that they might be you know tapering, right? And oh right, I just noticed that part of the part before that I was talking about quantitative tightening. I think that was supposed to be tapering, not quantitative tightening, right? What did that process where they buy back? Sorry, they release their stocks. Yeah, actually, I'm not even sure. Whatever. It's not supposed to be a perfect video anyways. So back then, I think Fed the Fed announced that inflation was at 7.5 percent. While the markets was expecting, I think, 6.5% or 5% or something. So the content of it does not actually matter that much. What really matters is investor sentiments, right? They were surprised. They were like, oh, inflation is not supposed to be that high. So they were surprised. And that's what caused the markets to actually take a plunge, right? Not just the stock market, but crypto as well. So investor sentiment. This also means that inflation doesn't actually cause crypto to underperform or lose valuation. in the long term, it's market sentiment. Thus, this means that any retracements will tend to be temporary as, you know, investors realize, hey, you know, it's not actually that bad. The market makers start, you know, pushing price up again to take out shorts, and, you know, you'll be Gucci. So news of inflation is bad for crypto in the immediate term, but midterm, long term doesn't really affect it. As I've already proven from the numbers, crypto is absolutely amazing as a hedge against inflation over the long term. So think about it, right? Again, historical performance of crypto, if you just regularly bought and hold, is at least a few hundred percent every year average. That again, I've shown you guys numbers. That's just for Bitcoin and Ethereum. You will get much higher gains with other coins, assuming that you can be patient with it and assuming that you do your own research. I'm not promising anything. Like, anything that can go up by 10x over 10 years can go down 99%. 99.99%, right? So manage your risk, do your own research, and that's how you come out on top. And trust me when I say this inflation thing, most people are not really paying it that much thought yet, but it's going to hit. It is going to hit. That's why I'm making this video, and that's why I'm going to make a second video on what you can do to outpace inflation other than investing in crypto. But for now, if you want to get access to all of the latest market updates, maybe you're not an investor, you want to learn how to do trading, and you want to follow along with all of my trades, get all access to all of my, you know, latest market updates, as well as gain access to the trading calls, then check out the private Discord group. Monthly is currently open. I'll put a Patreon link at the bottom, but if you're interested, check it out. If you're not, you know, don't check it out. And remember to follow me on Twitter at _TheArtOfCrypto. That's where I'm sharing the latest market updates outside of my YouTube videos. And please, if you watch until this point so far, Let me know if you enjoyed this. What can I work to improve on? Or do you think this is pretty good already? Right. You want to see more visuals, you want music, you know, whatever. Just let me know so that I can improve these videos. Right. Ultimately, content is important, but, you know, the way the content is presented is going to be important as well. So let me know. For now, thank you so much for watching until this point. I will be absolutely humbled if you actually watch under this point because this is a pretty long video. So You know, I made it again to be with you, my friend. And peace.