🧠 Elon's take on the market

Seedphrase Daily 👋 Today's email is packed with knowledge. We're like the Jimmy Neutron of crypto.

Today's Agenda 📓: 

• 🧠 Fed hikes & Elon's take

• ⛏ Is mining worth it?

• 😳 Meme of the Times.

FED hikes again.

The US Federal Reserve met and confirmed interest rates are rising by 75 basis points to 3.25%. A surprise to no one, as inflation is still at a disgusting 8.3%. Following the announcement, BTC took a hit and fell below $19K. 

So obviously, I bought a little BTC on this dip.

The Macro: 👀

• Short-term suffering for long-term gain: After printing trillions of dollars during the bandemic, we can see the government is desperate to bring inflation under 2%. Even if that means igniting a recession.

• Labor at record high: Despite soaring inflation, the labor force is growing unusually. The Fed sees this as a sign they can be aggressive about interest rates with out causing sharp spikes in unemployment. A double edged sword.

• Retail traders getting flushed 🏃‍♂️: Market makers use human psychology to take retail money (that's you). When retail traders lose, they think the market is a scam. When in reality, the big guys bank off our ignorance and emotion.

When will hikes end?

The federal funds rate is expected to reach 4.4% at the end of this year, so expect the next meeting to be another raise in interest rates.

This is probably just the start. The economy is bleeding, and inflation is shooting up like Dodge coin after Elon tweeted about it. 

But that doesn't mean a recession is a complete lose-lose situation. 

Elon Musk gave his take on recessions, which we posted on our TikTok: 

Here's what people are missing. 👇

Markets are a continuous cycle of ups and downs, so instead of dreading your 80% losses, zoom out. And let's find out how we can understand market cycles to:

1. Be a better investor 

2. Think less emotionally

3. Act logically 

Market cycles explained in correlation with Spiderman. 🕸

Using history, we can break down economic cycles into different parts to have a better overall understanding of wtf is going on.

Think of it like Spiderman's plot. Peter gets superpowers, but a villain comes to wreck his life. He defeats the villain, and then he gets a girlfriend.

Until the cycle eventually repeats or they make another movie.

The chart above is an overlay of the economic cycle and the market cycle. The market cycle has shifted ahead by about six months as it has historically led the economic cycle. 

Don't they look similar?

Peter gets superpowers/ Early recession 🕷: For Peter, life was dull and going down until he got bit and new opportunities arose.

As the economy heads deeper into the darkness of a recessionary cycle, the markets generally start their bottoming process in anticipation of a recovery. 

A Villain comes to wreck his life/ Full recession 👹: It's usually Uncle Ben dying, but after experiencing a tragic event, he sets off to become stronger and grow exponentially. 

After bottoming, the economy begins to see brighter days, green candles appear, money starts to flow again, and markets begin to slowly shift into a full-fledged cyclical bull market. 

He defeats the villain/ Early recovery 📈: Spidey needs to chill after the movie's climax. After all the highs, he's learned a lot and realizes he must return home.

As the markets warm to a full recovery, economic comeback heats up and becomes more mature, the markets begin to shift to recognize that all good things must end.

Gets a girl/ Full recovery 👩‍❤️‍💋‍👨: Like the teenager he is. Peter dates his high school crush to try and live normally. Little does he know he's stuck in the cycle and relaxes until it eventually repeats itself.

Finally, as the climax fades, the excitement falls off the market as it moves into the later stages of the bear market. And so on.

The reason I'm explaining this is for you to understand that; this has happened before. And will continue to happen till the end of time. Some parts suck, but that's something we must go through to get to the end. Peter lost almost everything before he could become something great. We have to hold it together.

📍Where are we in the market?

Suppose we use the chart as a reference and compare it to everything happening worldwide. We are beginning the recession, transitioning into the full-blown slaughter fest.

If this was Spider Man, we would be right at the beginning. Uncle Ben hasn't died yet, but we got bit by a spider, and life is strange nowadays.

Now that we know where we are in the market.

What's the plan? 📝

Understanding that we are still in the early stages of a recession, there are 3 options to make money. 

1. Short the market and sell before it hits the following support line. 

2. Dollar cost average into coins, buying a little more during dips.

3. Find side hustles to increase your cash.

4. Do not spend on anything you don't need.

5. All of the above.

BTC's current critical support is 19k. If it gets broken, the next potential level is 12k. 

And following that, the rest of the crypto markets will likely see a significant price decrease.

Bottom line: We don't know if we've capitulated yet, and my bets are we haven't. This is the time smart money positions itself to double. The silver lining here is that you have fantastic entry points to invest. If you're a BTC or ETH maxi, put your money where your mouth is. It will pay.

Last week, one of our handsome readers asked if BTC mining was still worth it.

Crypto is full of crazy stories, like these two kids who invested in BTC miners:

Ishaan and Aanya made $64,000 in seven months from mining in their house.

So you're probably wondering  how you can get a piece of that.

First things first.

What is mining? ⛏

• Bitcoin mining is the process by which new bitcoins are entered into circulation.

• It's a way the network confirms new transactions and is a critical component of the blockchain ledger's maintenance and development. 

• Blocks are created by miners, the people in the ecosystem who execute proof of work. Each time a miner comes up with a new winning proof-of-work, the network accepts a new block.

The decline of Miners. 📉

Since the start of 2022, miners have been struggling to earn a profit. As the price of BTC declines further and the cost of energy increases, the business isn't as profitable now. 

The demand has gotten so bad that Bitmain said it would drop the price of their 200 Antminer S19 Pro 104Th from an average of $68/TH in January to $20.8/TH on Sept 20 or $1,900 per unit.

The drop will also force other companies to reduce rig prices, which will tank the overall space.

Good time as any, if you're interested. 

But if BTC falls even more, which is highly probable. Here's what to expect:

• BTC miners to potentially become cheaper.

• Buying miners will become much more affordable as the demand decreases, creating a potential entry point to BTC mining (If you have the funds to buy the hardware, infrastructure and energy to mine BTC physically).

Is mining worth it for you? 🤔

Mining rewards are paid to the miner who discovers a solution to a complex hashing puzzle first, and the probability that a participant will be the one to find the answer is related to the portion of the network's total mining power.

The amount of money you can generate depends on your rig's power and how much punch it consumes. 

While anyone can technically mine Bitcoins, most Bitcoin mining is done by companies running large-scale commercial mining setups featuring data centers with specialized servers.

These mining farms are often built near affordable energy sources, such as hydroelectric dams, oil and gas wells or solar energy farms.

BUT.

Check out this free calculator if you have the capital and want to see your estimated profits. Just plug in the info of your rig, and you're gold. 

Calculate your profit 👈

How to mine bitcoin in 4 steps 👨‍💻:

After you've calculated your profit margins and established if mining is worth it for you, this is what you need to do. 

1. Acquire your Bitcoin mining hardware. 

2. Download the necessary software that will connect you to the Bitcoin blockchain. The software distributes work to miners and attempts to find blocks for the blockchain. NiceHash Miner is the most popular.

3. Join a Bitcoin mining pool. It is difficult for individual miners to compete with large mining farms backed by mining companies. Luckily, there is a solution – Bitcoin mining pools. Individual miners can combine their computing power with a group to compete collectively. Fees must be paid to the pool operator, and rewards are slightly lower, but using a mining pool will ensure rewards are more consistent.

4. Start mining. Connect your mining hardware to a power outlet, complete the connection to the Bitcoin blockchain with your chosen software, fill in your Bitcoin address for your rewards to be deposited, and you're good to go.

Boom. Degeneration wealth. 🙏

Don't know how to pay taxes on the profits you made mining?

Luckily for you, we have CoinLedger!

An all in one place to file taxes on your cryptocurrency! 

They are a TurboTax partner that completes your crypto taxes in as low as 10 minutes and makes it as easy as ever to avoid jail time for something so simple.

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😳 Meme of the Times.

New furniture.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research