The Gold Standard Reassessed
As we foresaw on May 4th, 2023, gold has seen a downward trend, with a dip of 5.82% since our prediction. The price of gold stood at $2049.92 on May 5th, 2023, and it has since decreased to $1,976.30. Historically, the precious metal has been a safe haven for investors, but the current trend paints a different picture.
The question on everyone’s mind is: how much further can it go down? A conservative and favorable scenario would be for gold to move sideways, stabilizing its price. However, the market may see gold continue to slide down to its next level of support around the $1800 mark. The uncertainty surrounding this trend invites us to revisit our investment strategies and consider the dynamic intersections of gold and cryptocurrency markets.
Crypto Winter: A Chilled Investment Landscape
In parallel to the gold market, the cryptocurrency sector has also seen a tumultuous time. The 2022 “crypto winter” had a profound impact on the market, resulting in the total market capitalization of cryptocurrencies dropping 62% from its $2.2 trillion peak at the end of 2021 down to around $835 billion. Despite these declines, the risk-adjusted return of crypto performed in line with US and global stock indices through 2022 and outperformed US bonds.
As we head into 2023, we see the evolution of the crypto ecosystem, highlighting subjects like tokenization, permissioned DeFi, and web3. Bitcoin’s core investment thesis remains intact, while Ethereum seems to be outpacing its layer-1 competition in terms of network activity. However, the financial market’s stop-and-start pattern has made capital allocation challenging across most asset classes, especially in cryptocurrency. This issue has been exacerbated by the insolvencies and deleveraging events of 2022, causing a confidence crunch that could extend the downcycle for several more months.
The outlook for 2023 suggests three key themes:
- A flight to quality among institutional investors.
- New opportunities will arise from creative destruction.
- Foundational reforms that usher in the next cycle.
Institutional investors have been scaling back their capital deployment due to rising interest rates, high inflation, and weak equity earnings. This retrenchment was happening even amid assumptions of a mild future recession in the US. The shift towards higher quality names like Bitcoin and Ethereum is expected within crypto, based on factors like sustainable tokenomics, the maturity of respective ecosystems, and relative market liquidity.
Ethereum: The Emergent Leader
With the recent proliferation of alternative layer-1 blockchains, the marketplace for these technologies has become saturated. Ethereum’s successful Merge of its consensus and execution layers in September 2022 has strengthened the case for ambitious future upgrades, despite the trend toward long-term core protocol ossification. This supports the fundamental narrative for Ethereum as a leader in a multichain world, mainly since nearly all networks are competing for the same pool of users and capital.
The gold and crypto markets are in flux, and it’s more important than ever to stay informed, evaluate trends, and strategically adjust investment portfolios. As we navigate these uncertain markets, the need for thorough research and informed decision-making becomes paramount.
Please note that it would be important to consider that this article is for informational purposes only and should not be considered investment advice. It’s always recommended to do your own research and consult with a professional financial advisor before making investment decisions. As markets can be unpredictable, it’s crucial to understand your financial goals, risk tolerance, and investment horizon.