- January 22, 2022
- Posted by: Bastion team
- Category: World News
7. A margin-induced meltdown
A seventh reason the stock market could crash in 2022 is due to rapidly rising margin debt — i.e., the amount of money being borrowed from brokerages/institutions with interest to buy or short-sell securities.
Over time, it’s not uncommon to see the nominal amount of margin debt outstanding increase. However, a rapid increase in outstanding margin debt is often bad news. As of November 2021, nearly $919 billion in margin debt was outstanding. That’s nearly double the amount of margin debt during the pandemic low less than two years ago.
Furthermore, we’ve only witnessed three instances since the beginning of 1995 where margin debt rose by at least 60% in a single year. It occurred just months before the dot-com bubble burst, immediately before the financial crisis, and in 2021.
8. A crypto crash
Over the long run, the stock market is a money machine. But in recent years, speculators have piled into the cryptocurrency market. Watching Bitcoin gain as much as 8,000,000,000% in a little over 11 years, or meme coin Shiba Inu tack on a 46,000,000% gain in 12 months, has driven a level of FOMO (fear of missing out) never before seen.