2022 has been a volatile and dangerous year, not only for the markets, but for just life in general – pandemic, food shortages, supply chain bottlenecks, and war. Moreover, global central banks as a result of inflation have enacted quantitative tightening policies to rack in skyrocketing prices, from consumer goods, food, and energy. But how has this impacted the investment landscape? Global equities are down, cryptocurrency markets are down after crumbling in May and June, and now commodities are down as a result of economic recession fears.
How Are The Cryptocurrency Markets Doing In 2022?
Ever since the global pandemic began and central banks reacted with quantitative easing, equities and cryptocurrencies in particular took off and rose to new heights. For example, in 2020, the entire crypto market was worth $750 billion, but by 2022, the market has risen to over $1.1 trillion.
However, in 2021, the crypto world saw its highest valuation at almost $3 trillion, with nearly all cryptocurrencies reaching ATHs and cryptos seeing their marketing value increase dramatically as well, even to being widely featured and commercialized at the Super Bowl. But since then there’s been drastic changes, with the markets and global economy in general taking a massive downfall from May through June, and the worst may not be over.
But just because the markets are down doesn’t mean cryptocurrency investing is over. Cryptos have regained a considerable share of the value lost, almost recovering 30% from their lows. As we all know, cryptocurrencies are volatile. Therefore, investors should invest in cryptocurrencies only if they’re aware of the risks involved, and investors should never invest more than they’re willing to lose. That’s the rule of the game.
Moreover, unlike in 2020 and before, the cryptocurrency market today is not stocked with speculative currencies, there are now many different sectors that have gained a market out of specific use cases.
For example, there are stablecoins, which have the backing of real assets like gold, or even stablecoins that mimic the value of the Dollar. In this case, the most prominent is Tether (USDT), which is pegged to the US Dollar.
Another type of well-known cryptocurrency are “value coins,” which are cryptocurrencies not pegged against a direct asset, but rather their value is determined according to market supply and demand. An example of a “value coin” is Bitcoin.
What Investment Techniques Can You Apply With Cryptocurrencies?
The first technique that investors employ in their cryptocurrency strategies is simple day trading, swing trading, or trend trading. Trading cryptocurrencies is actually easier than trading stocks because it’s more peer-to-peer and direct with the market, and it simply consists of buying and selling cryptocurrencies depending on how the price is doing. Phemex is a great place to trade cryptocurrencies because it’s an exchange that has a liquid market of buyers and sellers.
The second technique is staking, which in the centralized exchange context, is when a trader or investor stakes his or her cryptocurrencies on an exchange, and in return, receives a yield or interest called APY. Phemex has staking-like features such as Phemex Earn and an interest-earning Savings account.
The third technique is HODL. Holding consists of acquiring a cryptocurrency, keeping it while its value increases (or decreases), and over the long-term potentially selling at various prices (take profit). HODL is a great investment technique for experienced traders and those traders who do better under emotional stress and can stomach the market ups and downs.
To provide more detail, on Phemex, traders can trade by spot trading, which consists of buying and selling cryptos according to the market price at the time. In spot trading, the user will receive the assets immediately and own them.
The second method to trade cryptocurrencies on Phemex is through (derivatives) or contract trading, which is a legal contract between a trader and an exchange to buy and sell contracts of an asset like Bitcoin. Contract trading in particular allows traders to access direct exchange capital with a larger margin than they initially invested to increase their profit potential. Phemex is one of the best cryptocurrency exchanges for derivatives and contract trading.
How Are The Stock Markets Doing In 2022?
The stock market is defined as “the set of markets and exchanges where the activities of buying, selling, and issuing shares of companies listed on the Stock Exchange are carried out.”
Different economic agents operate within the stock market such as well-known financial intermediaries, brokers, consumers, and large companies. Financial market operations are carried out through formal institutionalized exchanges or over-the-counter (OTC) markets that operate under a defined set of regulations.
There may be several stock trading venues in a country or region that allow trading in stocks and other forms of securities such as the New York Stock Exchange, the NASDAQ, the Hang Seng, the London Stock Exchange, the Tokyo Stock Exchange, and the Shanghai Stock Exchange.
As a general rule, to make money in stocks you need to invest in companies that generate profits, that are great brands, and that have upside potential and valuation.
In 2022, the stock markets were performing great until Russia’s invasion of Ukraine and until inflation numbers started hitting astronomical heights. Since then, there’s been a global retracement of around 20% to 30%, and fears of stagflation and recession have kept the stock markets from recovering back to their Fall/Winter 2021 highs.
The World’s Largest Stock Exchange: The New York Stock Exchange (NYSE)
The New York Stock Exchange (NYSE) is the world’s largest stock exchange. On the NYSE are different types of securities such as bonds, shares, and ADRs. For nearly 100 years, New York has been the global center of finance where all the best companies go for funding, investment, and business.
As you can see from the picture above, the NYSE and the Nasdaq dominate the world’s stock exchanges in value and market cap. So without a doubt, the best companies in the world generally prefer to have a listing on the NYSE.
How Is Gold Performing In 2022?
Hard commodities like gold and silver are considered the safe haven investment assets because of their low volatility. As an old-school rule of thumb and over the very long-term (such as the 50+ year range), gold is considered as one of the most profitable and safest investments. But why is that? The price of gold is generally stable (with an upward trend) because investors like gold to hedge against potential recessions. Gold did well following Russia’s invasion of Ukraine and because of recession fears, but over the past month the price of gold has also fallen, and gold’s price increases never match the price of inflation.
Conclusion: Similarities & Differences Between The Three Asset Classes
The stock markets and cryptocurrencies have grown increasingly correlated over the past year, with each of them seemingly rising in tandem. Moreover, further analysis shows that the same general factors affect both stock and crypto prices. For example, supply and demand, investor sentiment, economic conditions, monetary policy (QE + QT), geopolitics, regulation, stock issuer financial health, and changes in crypto development.
The most recent examples of external factors that have hampered the stock and crypto markets are the war in Ukraine and rising inflation. However, gold has been more steady, not having huge price increases nor witnessing intense price declines. These are the main differences, stocks and cryptos are risk-on, and gold is considered risk-off.