Cryptocurrency Explained: Key Differences Compared to Stocks
An analysis of: Cryptocurrencies, Stocks, Gold and other Commodities as backing for StableCoins.
The world is a beautiful place. At the very least, it has the potential to be. Unfortunately, today's world is an over financialised, heaving wreck of debt denominated debt, revolving credit roulette and unscrupulous monetary regret. All that being said, it's still utterly beautiful, we just need to know where to look.
Knowing Where to Look
If you've made it this far, odds are you're probably familiar with the current, heavily inflated macroeconomic conditions plaguing society. Unless you happen to be a reality exempt board member of a globalist institution, you're likely cognisant of the fact that your dollars are now buying you substantially less than they were 2 years ago.
I'm not going to get into the nitty gritty of how and why we ended up in this mess, however I will say that it's probably not a result of “supply chain bottlenecks of cargo ships in the south-eastern sea ports of Ukraine, but that's just me”. Perhaps the coordinated doubling of the money supply by Central banks around the world has had something to do with it?  . I do find it awfully convenient that all of these conflicts and crises have arisen during a period of excessive monetary expansion. Is it within the realm of possibility that they only exist (via the media machine) as a way of justifying inflationary pressures? No, surely not.
Anyway, I'll leave that overly conspiracist questioning for your subconscious, we have more pressing issues at hand.
The June 16 FOMC meeting is sure to be pivotal in determining the direction for markets over the coming months and remainder of the year. There's a hell of a lot riding on this next meeting as both retail and institutional investors await the Federal Reserve’s (FED) next interest rate decision (FED Funds Rate). On any normal June day, in an otherwise normal year, such a decision would be substantially less significant, however, this time around, it would be fair to say that the direction of global markets and continued solvency of thousands of over-leveraged, heavily-indebted companies may well be resting in the balance.
You'll have to excuse the alarmist take on this, however I do have my reasons.
For one, US equities (the notorious front runners of global equities) have for the most part corrected quite harshly from their all-time highs back in February this year. The Nasdaq alone is down almost 30% in the last 3 months, and the S&P 500 has fared slightly better, declining almost 25%  . At this point, investors across the globe are split decisively between two camps. The Buffets and the Burry's. On one hand you have those who believe adamantly that "Stonks only go up" and this is nothing more than another 20-30% correction in a never-ending stimulus fuelled, everything bubble, while on the other hand you have those who see overinflated asset prices, unsustainable valuations and the ever-present threat of monetary policy tightening weighing firmly on the continued steady rise in risk-on assets.
Personally, I see the possibility for this to play out both ways. It's hard not to. Yes, we have a world fueled on nothing more than the debt that was acquired to pay back debts that were acquired to pay back more debts. What's to say that policy makers don't just roll out the Modern Monetary Theory (MMT) playbook for another stab at the socialist dream. After all, they did it in 2008 , it should have all collapsed then, but it didn't. They did it in 2020 and they could well do it again now. The infamous quote "Markets can remain irrational longer than you can remain solvent"  has never been more pertinent.
So realistically, a return to post covid stimulus measures is all but assured to be off the table for the time being. At least while inflation numbers are threatening to break out into double digits. We've already seen it in the UK, with their CPI hitting 9% last month, and the US is not far behind, sitting on a headline inflation rate of 8.3% .
So, all things considered regarding inflation, there's just no logical way that the FED and the US government could justify a return to the bottomless printing saga without seriously acknowledging that they could possibly be sacrificing their global reserve currency status along with general constituent faith in Fiat. It's just not worth it for the potential reward, which would likely result in nothing more than another 20-30% rally in those same already well overpriced equities, only to be faced with collapse again in another few months. We already know that the Chinese and the Russians are potentially eyeing off America's global reserve currency status, albeit for trade in singular commodities such as Gas, Gold, Oil, etc.
So if they won't revert back to their trusted printing presses, what will they do? Well, at this point, barring any drastic changes in economic data plots such as jobs numbers, it seems that the market is pricing in another 50bps rate hike. Now that may seem tiny, and rather insignificant, however, it couldn't be further from the truth. Yes, we have inflation nearing 10% and a 50bps rate hike would leave the FED Funds Rate at a mere 1.5%. Though, when you look at it the other way, a 50bps hike, represents a 50% rise in debt serviceability expense. In a time like today, where companies have accrued immense amounts of cheap debt, such a rise could well be enough to spook investors, leading to another potentially cataclysmic collapse in global markets. A deleveraging event like no other. What goes up must come down. Whoever said that was only observing nature, a wilderness that we and our financial systems are all still a part of.
Interestingly, over the last 50 years, since the beginning of interest rate interventions, the FED has never been able to raise rates more than half of the previous tightening cycle’s peak . Basically, this means that if history repeats, which it so often does, the FED won't be able to hike past 1.25% (2.5% peak in 2018) before the markets throw another tantrum and equities start running south again.
Really, it's all going to come down to the FED's appetite for collapsing an already collapsing system. Regardless, one could reasonably predict that if we see rates surpass the 1.25% level, we'll almost certainly be in for one hell of a tumultuous ride and it ain't going to be pretty.
So what can we do?
Well, I never thought I'd say this, but cash may actually be king again in the near term. As much as Gold and Silver will always have their upside, the reality of severe deleveraging events is that risk-on and risk-off assets all fall together. Historically, gold has only ever corrected around 30% before beginning what has always been a meteoric rise, which in 2008, equated to 300% in 2 years . We can expect much the same for Silver this time round, except its amplitude in proportion to gold is likely to be far greater. It's also worth noting that gold and silver typically regain any deleveraging induced losses within a matter of weeks as investors begin to realise that they are the only true forms of wealth preservation completely free of sovereign risk. No one can take them as long as you can protect them. Every single person in the world respects them as currency, and they won't cease to exist if the Internet suddenly goes down. Your holdings in physical gold and silver bullion are the original immutable token of wealth, made by the universe, for the universe.
I should also add that moving to cash presents numerous risks, namely in the form of bank-bail in laws, that in some cases could see depositors funds be used to pay off creditors in an event of default by your holding bank. As much as that situation may seem dystopian and entirely improbable, in this climate, it could be a lot more likely than many of us may like to accept.
When to buy Gold and Silver?
I'm obviously not going to tell you when to buy gold and silver, because that would be grossly unprofessional and I'm definitely not a financial advisor. However, I will point out that from September to October 2008, gold fell only 27% to a low of around $680/oz . Hypothetically, an investor in gold prior to the Global Financial Crisis, would have been in the red for only 2 months before gold rebounded rapidly in a rally that saw the gold price set all time highs at $1920/oz by September 2011. A 2 year ride for a near 300% return.
For comparison, the S&P 500 did not return to its 2007 highs until March 2013 . Pick your crisis hedge. I know what I'd prefer. Realistically, you're not buying physical, unleveraged gold to become a millionaire overnight. An investment in gold is an investment in wealth preservation and an incredibly proven method of retaining wealth and purchasing power in times of severe economic and monetary duress. We don't yet know just how bad things could get, if and when this everything bubble pops. What we do know, is that an ounce of gold and silver will likely buy substantially more 2 years from now, than it does today.
The best of both worlds
With sentiment at an all time low across a number of financial sectors, the value investors among us will no doubt be on the lookout for exceptional opportunities brimming with upside potential. Below I will highlight the details and benefits of xbullion’s tokenised commodity offerings.
For Starters, there's no custody fees. If you were to head down to your nearest bullion bank, you'll find yourself paying numerous excess costs, not just in absurd spot price spreads, but also in custody, storage and insurance fees. In many cases, these fees can add up to hundreds or even thousands of dollars every month depending on just how big of a truck you actually backed up. On the contrary, xbullion's GOLD and SILVER tokens carry zero custody, storage or insurance fees, and you'll also be circumventing getting rorted on spreads. Let's be real here, you're not investing in gold and silver to be bound by recurring holding fees.
It also wouldn't be fair to discuss the benefits of xbullion's GOLD and SILVER tokens without highlighting their most impressive capability. You can actually take delivery on your physical bullion! With xbullion's bullion, you get all the benefits of tokenised gold and silver, secured and verified on the blockchain and you can redeem your bars in kilogram lots for your own personal enjoyment.
In a nutshell, xbullion's GOLD and SILVER tokens open up a world of possibilities in an increasingly constrained economic environment.They enable the seamless transfer of wealth; instantly, from anywhere, to anywhere at minimal cost, all while ensuring the safety and security of your assets completely free of charge. Put simply, xbullion allows you to take back control of your wealth, which In times like these, could be utterly priceless.
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