welcome to money is freedom
a podcast
exploring how finance and freedom connect in our lives
created from thoughtful research
and narrated by Notebook LM AI
this series brings you clear
meaningful insights into finance and beyond
welcome to episode 26
where we examine the recent market correction
in crypto's resilience
compared to traditional equities
despite factors like strong employment data
and inflation concerns
Bitcoin and Ethereum have shown strength
the episode also discusses
how 2025 seems to be breaking
Bitcoin's historical pattern of January corrections
the crypto market reacted positively to recent CPI data
while the traditional stock market
showed only modest recovery
the podcast highlights
the evolving relationship between traditional
and crypto markets and crypto's increasing resilience
all right buckle up everybody
because today
we're diving headfirst into market corrections
yeah it's a hot topic right now
you know
both the stock market
and crypto have been taking a beating
definitely a bit of a roller coaster ride lately
but here's a thing that's got me curious
crypto seems to be bouncing back way faster
it's interesting right
so we're gonna try and figure out why
using this article for medium sounds good to me
why crypto is showing resilience
amid broader market turbulence
okay yeah
I saw that article catchy title
and just to tease you all a little bit
bitcoin might actually be breaking its own rules
at this time around
that's interesting
people always say Bitcoin follows these patterns
well we're about to find out so first things first
let's break down why we're seeing this correction
in the first place what happened
what spooked everyone
well um
a lot of it boils down to jobs jobs okay
that December 2024 jobs report remember
oh yeah that's right
it was way stronger than anyone expected
a lot more jobs added than we thought yeah
way more 256,000 new jobs wow
when the prediction was only 160,000
so that's good news right
well it's good for the economy on the surface
but but wait explain that to me more jobs
how is that a bad thing okay
think of it like this imagine
there's only a certain
number of swings on a playground okay
got it
but then all of a sudden like tons of new kids show up
yeah and they all wanna use the swings
exactly
more kids wanting to swing that means more demand right
so more people working means more money to spend
exactly
more people with money to spend means higher prices
so basically more jobs equals inflation ah
I see so
this strong
jobs report is making everyone worried about inflation
right and that low unemployment rate too
only 4.1% it all just kind of adds fuel to the fire
investors are worried
the Fed might have to raise interest
rates to cool things down okay
so interest rates remind me how this all works again
basically when interest rates go up
it gets more expensive to borrow money right
right like credit cards and loans
it affects companies too costs them more to do business
slows downgrowth cuts into profit
so investors see interest rates going up
and they start to panic pretty much
they start selling off stocks
especially
in sectors that are sensitive to intrastrate hikes
you know like tech
yeah because
the stock market is
all about what people think is gonna happen
in the future right exactly
if investors think future growth is going to be slow
because of high borrowing costs
they're not gonna wanna pay as much for stocks today
make sense and we saw that play out
big time with those magnificent seven tech stocks
didn't we Apple Microsoft
Google the whole gang
they all took a hit yeah
they did
the article says they're down an average of 14.1% ouch
yeah and it's not just those big companies
what do you mean well
the Russell 2000 you know
the one that tracks smaller companies
that's down to oh wow
so this is like a widespread correction
not just limited to TAC it is
it's back down to where it was before the election
pretty much across the board right
so we've got the inflation worries
rising interest rates
investors hitting the panic buttons
selling off stocks but crypto took a hit too
didn't it yeah
I thought crypto was supposed to be this decentralized
separate system what happened there
well in theory yes
but at the end of the day
crypto is still a market so
and markets are driven by people
by how they feel
when there's a big shift in how much risk
people wanna take like we've seen with this correction
even something like crypto can feel it
even though it's supposed to be separate
exactly
so even though crypto has its own unique dynamics
it's still kind of
swimming in the same ocean as the stock market
okay
so everyone's getting cost around by the same waves
pretty much but here's what I don't get
stocks in crypto both went down
but crypto seems to be bouncing back much faster
it is our article calls it Crypto's resilience
why is that what's making crypto so much more resilient
compared to the regular stock market
well there are a couple of things that play um
one of the biggest things is institutional adoption
institutional adoption
so like the big players are getting involved
exactly hedge funds
pension funds you name it
they're starting to get into crypto
and that brings a lot of money
a lot of capital right
it probably makes it seem more legit
like it's not just for tech nerds anymore
exactly it's becoming mainstream
and one of the biggest drivers of that
has been the approval of spot bitcoin etfs
oh yeah
those etfs but um
remind me how those work again
well basically
etfs make it really easy
for everyday investors to get exposure to Bitcoin
through their brokerage accounts
okay so they
don't have to go through the hassle of setting up a
crypto wallet or figuring out all the technical stuff
exactly
it's like a pre made salad mix from the grocery store
you don't have to chop all the veggies yourself
that's good analogy so
these etfs have been
a big deal for mainstream adoption of crypto
okay so institutional adoption and these etfs
they're making a difference
what else is helping crypto stay strong
the crypto market itself is just maturing
it's becoming more liquid
easier to buy and sell
large amounts without huge price swings
we're also seeing more sophisticated platforms
and financial instruments emerge
the whole ecosystem is getting stronger
so it's not the Wild West anymore
like there's a sheriff in town now
exactly
it's becoming a more mature and efficient market
which means
it's not as susceptible to those crazy price swings
we used to see and on top of that
crypto operates separately from the regular
financial system right yeah
so it's not as affected by those interest rate hikes
they're causing so much stress in the stock market
right it's got a degree of insulation from those macro
economic forces so
even though crypto got caught in the same way
this stocks it's got a different kind of surfboard
I like that yeah
it's writing the wave differently
okay that makes sense
yeah but
there's one more thing
that's got me scratching my head
you mentioned earlier
that Bitcoin might be breaking its
own rules yeah
what's that all about well
it has to do with this historical pattern
bitcoin tends to follow especially after a having year
having year okay
I have no idea what that means
fill me in so every four years
Bitcoin's code
actually cuts the rate of new Bitcoin creation in half
oh wow
so like less bitcoin is being made
exactly and that can impact the price
because you have less supply coming into the market
right that makes sense
so lith
bitcoin being created usually means the price goes up
it can yeah
think of it like a limited edition sneaker drop
or something the fewer pairs there are
the more people are willing to pay
I get it scarcity drives up the price right
but here's the thing after a having year
bitcoin is typically seen a dip in January
really a dip
I thought less supply meant higher prices
it usually does
but we saw this pattern in 2017 and 2021
both times after having year
bitcoin dropped around 30% in January
wow so it's like clockwork
every having year
bitcoin goes on sale in January pretty much
it's almost like it has its own little calendar
so what about this year
did bitcoin dip again in January
well that's where things get interesting
this year it seems like that big market correction
we talked about
it kinda acted like an early January correction
for bitcoin early
so it dipped before January
yeah bitcoin
dropped from about $108,000 on December 31st
to around $92,000 by January 14th
hmm that's a pretty big drop
but not quite 30% right
right
so it's not following that typical pattern this time
so what's going on is bitcoin breaking its own rules
it seems that way
and this suggests that those macroeconomic forces
we talked about the interest rates
the inflation worries they're actually having a bigger
impact on bitcoin's price
this time around than its own internal cycles
so even though
Bitcoin is supposed to be
separate from the traditional financial system
it's still getting affected by what's happening in
the stock market it seems that way
it's almost like the stock market's problems
kind of front run Bitcoin's usual January dip
so all that stuff happening in the stock market
with investors worrying about interest rates
and inflation it kind of spilled over into crypto
yeah exactly
like even though
those kids on the playground
are playing their own game
with Bitcoin they're still in the same playground
and they can still feel the overall mood
that makes sense
so it's not that Bitcoin is breaking its own rules
it's just that there are bigger forces at play
this time it seems that way
it shows how bitcoin even though it's decentralized
is becoming more integrated with the broader
financial world that's really interesting
okay so we've got this unusual bitcoin behavior
and it's all tied to what's happening in
the stock market but then we also have
this new CPI data that just came out right
yep on January 15th
the CPI that's the Consumer Price Index
which measures inflation right
that's right and everyone's been watching it closely
to see if inflation is finally starting to slow down
so what did the CPI data say
well the numbers were interesting
the headlines CPI
which measures overall inflation came in at 2.9%
and that was pretty much what people were expecting
right right yeah
right in line with expectations
but the course CCI which excludes more volatile things
like food and energy prices
was actually a bit better than expected
oh so course
CPI is like a more stable measure of inflation
you could say that it came in at 3.2%
which is better than expected
you said yeah
slightly better so is that good news for the markets
well it depends on which market you're looking at
what do you mean the cryptocurrency market reacted
really positively to the CPI data really
how so bitcoin surged back up towards $100,000
wow that's a big jump
but why did the crypto market react so positively
it all has to do with what happened to tenure
US Treasury yields okay
back up for a second yields
why are those so important again
remember those swings on the playground we talked about
yeah the ones with limited supply and high demand
well
think of bond yields as the cost of renting a swing set
for a year when those yields
are high it's like the rental price is expensive
and investors are more likely to stick with their safe
boring backyard swing set
I see so bonds are like the safe option
yeah generally speaking
but when those yields dip
it's like the rental price for that fancy
new swing set suddenly becomes a lot more appealing
so lower yields make riskier assets like crypto
look more attractive exactly
because the safe option isn't paying as much
and this makes sense when you think about how
bitcoin is becoming more widely seen
as a potential hedge against inflation
if people aren't as worried about inflation
they might not be as interested in those hedges
right because if inflation is cooling down
you don't need as much Protection against it
exactly so
when that core CPI number came in better than expected
it caused those tenure Treasury yields to dip a bit
and that made riskier assets
like crypto more attractive
so crypto got a boost from the CPI news
because it made the safe option less appealing
exactly
investors are always looking for the best return
for their money
and when safe investments aren't paying as much
they're more likely to take on a little more risk
that makes sense but what about the stock market
didn't it also get some good news from the CPI data
I mean inflation seems to be cooling down
so shouldn't investors be happy about that
logically yes
but the stock markets reaction was
much more muted than the crypto markets really
why is that the Russell 2000
for example only saw a small bump
so the stock market didn't
really care that much about the CPI news
it did to some extent
but those high bond yields are still a big factor
they're still drawing investors away from stocks
it's like the stock market is still sulking about
those higher borrowing costs
we talked about earlier like
it can't quite shake off
the worry that the economy might slow down
yeah that's a good way to put it
the CPI data was a step in the right direction
but it hasn't completely erased those concerns
about inflation or a potential slowdown
okay so we've covered a lot of ground here
we talked about the reasons behind
the stock market correction
how crypto is showing resilience
and even how Bitcoin might be deviating from its usual
post having year pattern
and then we dove into how the latest CPI data
impacted both markets in different ways
we have yeah
it's fascinating to see how everything is connected
okay so after all that
what does this mean for like the average investor
someone like me or our listeners
trying to make sense of all this market craziness
what should we be doing I think the biggest takeaway is
you gotta pay attention to everything everything
both the traditional economic stuff
like interest rates and jobs reports
but also the stuff that's unique to crypto like what
like institutional adoption
who's getting involved are more big players coming in
also you know
what's happening with blockchain technology
any new developments and of course
what are governments doing
are there new regulations coming
all that can affect the crypto market
so you're saying we have to be bilingual
yeah kind of
you gotta speak Wall Street in the metaverse
no problem I'm a fast learner
but speaking of learning
this whole Bitcoin January anomaly thing
that was a real eye opener for me
you're saying that macro
economic forces are actually driving Bitcoin's price
more than its own internal cycles this time around
so what does that mean
for people who
base their trading strategies on those cycles
they're kinda out of luck right
yeah it's a good question
those strategies might need to adapt
if we keep seeing these early bitcoin corrections
those traders could be caught off guard
it's like showing up to a party a day early
because you got the date wrong
haha exactly
it just highlights how important it is to be flexible
and stay informed
especially with something as fast moving as crypto
why they were
given our listeners a lot to think about today
we talked about the reasons for the market correction
crypto's resilience
this interesting Bitcoin January anomaly
and how that CPI data shook things up
I feel like I Learned a ton
any final words of wisdom before you wrap things up
hmm I'd say stay curious
keep learning and don't be afraid to ask questions
and always remember investing is a Marathon
not a sprint well said
alright everyone
that's our deep dive into market corrections
and crypto suppressing strength
until next time
stay informed and keep riding those waves