More Pain Ahead?

More Pain Ahead?

The sell-off everyone has been predicting is finally here.

After reporting another blowout quarter, shares of Nvidia (NVDA) rocketed up 5% Thursday morning. The Dow index soared 700 points higher… And the “AI boom” was back in full swing – until it wasn’t.

By 12:30 p.m., NVDA was down 7%... the Dow had given up all its gains… and the S&P 500 and Nasdaq were down as much as 3.5% and 4.5%, respectively, from their morning highs.

Bitcoin sliced below $85,000 like a hot knife through butter. And the altcoins all followed lower.

What happened?

On Thursday, the market realized that – perhaps – we’re a little overreliant on Nvidia.

What does this have to do with bitcoin and the altcoins? ABSOLUTELY NOTHING. Just like April’s “tariff tantrum” had nothing to do with bitcoin.

But that didn’t stop bitcoin from dropping from $109,350 to as low as $74,400 back then.

Could bitcoin drop that low again? Sure, it can. And we’ll go over what the indicators are saying today. But here’s what you need to keep in mind:

When the market panics (which it’s doing now) and needs liquidity to cover margin calls… It doesn’t care how great the long-term story is for an idea – everything that can be sold gets sold in order to meet margin calls.

And hear me when I tell you: The amount of margin in U.S. equities is at crazy levels.

Margin debt has increased to $1.1 trillion from $700 billion at the start of 2024, according to the Financial Industry Regulatory Authority. That’s a 57% increase in borrowing to invest in markets.

During times like now, it’s important for you to know what you own. What I mean is it’s easy to get your confidence shaken when your stocks or crypto positions are getting absolutely walloped lower.

And when your confidence is shaken, you can do dumb things like turning a temporary loss into a permanent loss by selling.

In a perfect world, we’d buy at the bottom and sell at the top – and do that repeatedly as our favorite stock or crypto worked its way higher across its long-term price trajectory.

But we don’t live in a perfect world.

In the real world, the way you make big money is by identifying investment ideas with long-term fundamental growth prospects… And buying them and holding them no matter what.

That’s been true in the stock market for companies like Microsoft, Oracle, Amazon, Google, Facebook, and Apple. And it’s been equally true for bitcoin, Ethereum, Solana, and a whole host of other high-quality crypto coins.

This Isn’t My First Rodeo