Hard Lessons From Wall Street’s $5 Trillion Loss 

TLDR

• Late last week, the stock market suffered its worst crash since the March 2020 Covid pandemic crash.
• Bitcoin hasn’t lost nearly as much as stocks.
• A lot of newer investors have had to learn some hard lessons this week. There is no such thing as risk-free investing.

For those of you who just want the moral of the story right off the bat, here it is: stay calm.

The stock market had a rough couple of days. Wall Street saw $5 trillion wiped off the S&P 500 in a record-breaking drop. For perspective, that’s more than the total market cap of all cryptocurrencies combined. 

While many beginner investors might feel tempted to hit the panic button, events like this are a stark reminder of a universal truth in investing: markets are unpredictable, and risk is everywhere.

Before you start thinking of selling everything, take a deep breath. Here’s a breakdown of what’s happening, why it matters to all investors — including crypto enthusiasts and stockholders alike — and how buying and holding might just be your best response.

Understanding the Recent Wall Street Chaos

According to a report from Reuters, the S&P 500 suffered a historic $5 trillion loss in market capitalization, surpassing the previous record set in March 2020 when COVID-19 shook the globe. 

Tariff-related worries, particularly between the U.S. and China, added fuel to the fire, sending the Nasdaq into bear market territory while confirming corrections for the Dow and pan-European STOXX 600. The ripple effects were felt across financial markets, with commodities like oil plunging alongside tech giants and bank shares.

But here’s where it gets interesting for crypto investors. While Wall Street endured one of its worst sell-offs in history, Bitcoin held its ground (for the most part). The (relative) stability sparked renewed debates around Bitcoin’s role in financial markets, with some viewing it as a hedge against traditional market volatility. 

Could Bitcoin be the digital gold skeptics once doubted it could become? Possibly. But that’s not the whole story.

Lessons for All Investors (Yes, Even Crypto Newbies)

For everyone who has ever cried about crypto volatility and spent the end of last week watching a year’s worth of market gains getting wiped out (yep…an entire year’s worth of gains in less than 48 hours), welcome to our world. Here’s what everyone, not just crypto or stock investors, stand to learn from these events.

1. ALL Investments Carry Risk

You’ve probably heard it before, but it’s worth repeating. No investment is risk-free. 

If there were such a thing, everyone would be plowing money into it, inflation would be through the roof, etc…

It’s important to remember that all financial markets are inherently cyclical in nature.

Stocks, often hailed as “safe” investments compared to more volatile assets like cryptocurrencies, reminded everyone that they are also subject to massive swings based on global events. If tech companies, banking giants, and oil producers aren’t immune, why would any other market be?

Traditional stock investors and crypto enthusiasts have more in common than they might think. Both face risks influenced by unpredictable factors like government policies, global economies, and even tweets (Sup, Elon. Don’t ban me, bro).

Diversify your portfolio because putting all your eggs in one basket isn’t sustainable, no matter how “safe” a market seems.

2. Bitcoin’s Recent Stability(ish) Is Food for Thought, but Not a Guarantee

While Bitcoin remained relatively stable during the recent stock market turmoil, it’s essential to approach this observation with caution. 

Historically, Bitcoin is no stranger to volatility. Just because it held steady during this downturn doesn’t mean it will always act as a “safe haven.” However, it’s becoming increasingly clear that some investors are seeing Bitcoin as a potential hedge against global financial instability.

For the crypto newcomer, that doesn’t mean you should go all-in on Bitcoin. Instead, consider it as part of a long-term, diversified multi-asset plan. Bitcoin stability during specific events doesn’t make it the new gold standard — but it does make it a contender for attention in your portfolio.

3. Panic Selling Hurts in Any Market

We’ve covered this previously in the Dypto Crypto newsletter. It’s pretty good. We highly recommend that you check it out. 

/shameless plug

Panic selling is rarely a good idea, whether you’re dealing with stocks or crypto. Historically, markets recover, whether we’re talking about the S&P 500 after a global pandemic or Bitcoin following regulatory crackdowns. Emotional decisions can lead to massive losses, especially when prices rebound, and you’re no longer part of the action.

Instead, lean into the virtues of “buy and hold” (or for crypto enthusiasts, HODLing). Long-term investors typically fare better because they ride out the dips instead of locking in losses by selling at the worst possible time.

What tanks today could hit all-time highs tomorrow. Timing the market is almost impossible, which is why having a long-term strategy matters far more than reacting to short-term noise.

The old investing cliche still holds true. “Time in the market is always better than timing the market”.

Why “Buy and Hold” Works 

“Buy and hold” is a tried-and-true strategy that involves, well, exactly as it sounds. You buy investments and hold onto them long-term, regardless of short-term fluctuations. It’s a strategy widely recommended for stock investors but equally relevant to cryptocurrencies, especially when we’re talking about blue-chip tokens that have been around a long time.

It, unfortunately, doesn’t really apply to meme tokens.

Bitcoin’s historical trajectory shows significant gains for long-term holders despite turbulent dips along the way. A Bitcoin investor who held their assets from its 2013 average price of $100 to its current levels (hovering around $78k at the time of this writing) has seen returns that no day trader could compete with.

The same logic applies to stocks. Despite the S&P 500’s catastrophic days, its long-term average annual return remains strong. Holding through temporary downturns allows you to benefit from eventual market recoveries and compounding returns.

What Should Users Do During Market Turbulence?

Step one: chill.

Here’s a step-by-step guide to staying calm and strategic, even when headlines scream chaos:

Assess the Situation

Take a look at your investments. Are they aligned with your long-term financial goals? If so, stick to your plan. If not, consider making thoughtful adjustments — but avoid knee-jerk reactions.

Avoid Emotional Decisions

When markets drop, fear sets in. “Fear is the mind killer” (where my Dune fans at?).

It can cloud your judgment and lead to decisions you might regret, especially selling your investments at a loss during a panic. Stay disciplined and focus on long-term gains.

Diversify Your Portfolio

Spread your investments across different asset classes and markets. This can help reduce risk and ensure you aren’t overly exposed to any single sector or investment type.

Educate Yourself

Never stop learning. An educated investor is a better investor. Whether you’re investing in stocks, Bitcoin, or altcoins, knowledge is power. Understand the risks, market trends, and the underlying value of your investments. Continuing to learn can give you the confidence to make informed choices.

Trust the Process

Markets recover. It may take weeks, months, or even years (crypto winter PTSD was just engaged…), but history shows that patience pays off for disciplined investors.

The Bigger Picture

Wall Street’s recent $5 trillion loss is a reminder that all investments carry risks. Stocks, often considered the go-to for stability, aren’t immune to sharp declines. Similarly, Bitcoin, with its newfound resilience during this storm, remains a volatile asset at its core.

A long-term perspective gives you a far better chance of success than reacting to short-term noise. Whether you’re holding onto S&P 500 index funds or HODLing your Bitcoin, stay calm, diversify your investments, and make decisions based on strategy rather than fear.

Markets may get messy, but your financial future doesn’t have to. Play the long game, and you’ll be better equipped to weather any financial storm.