In the wake of a cataclysmic crypto crash and continued market instability, bullion’s never shone brighter.
SBF. They’re the letters on everyone’s lips right now. Well, those and FTX and FTT. Calamity, it seems, comes in threes.
Sam Bankman-Fried, popularly known as SBF, the former white knight of crypto who literally overnight morphed into Darth Vader, last week threw a massive curveball at an industry many previously considered impregnable.
A stellar piece of investigative journalism by the publication CoinDesk revealed SBF’s crypto exchange empire FTX was built on sand. And when the golden boy who only this year had been bailing out fellow crypto firms went in search of his own saviour, he was instead left to twist by his former mentor, Binance CEO Changpeng “CZ” Zhao. Binance had, in fact, set the dominoes in freefall a few days earlier dumping around $580 million of FTX’s proprietary and extremely dodgy token, FTT, sending the price plummeting.
The moves sent shockwaves through the cryptocurrency sector and sank FTX – only recently valued at $32 billion – into almost instantaneous bankruptcy. The irony is that FTX was meant to be part of crypto’s stable backbone: the sober, suit-and-tie trader in a room full of snake oil salesmen. Tragically, the life savings of countless FTX crypto investors will almost certainly never be retrieved.
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Predictably, the cryptocurrency markets have lost investor confidence and continued to tumble. Bitcoin, already 70% down from its heights early in the year, has fallen a further 25% in the past 10 days. Cryptocurrencies, always known to be volatile, are becoming increasingly hazardous.
Of course, it’s not just crypto that’s down. Market sentiment in general is in a bad place. The market is battling the consequences of rapidly rising interest rates, sky-rocketing inflation and a military conflict in Europe that still has no end in sight. The outlook is dire. Many experts believe market instability could continue for years.
In such a climate, where do investors turn? The answer may be surprising.
As an investment, gold gives you as much certainty as you can get. It is the metal we fall back on when currencies are losing value, and when stocks and bonds and other investments are underperforming. It is particularly durable in times of economic volatility – the calm centre in the eye of the storm, its value remaining buoyant even through the most unstable periods of history.
Indeed, in recent times, it has weathered the Covid pandemic, the war in Ukraine and inflation crisis with barely a scratch.
Gold is a particularly powerful hedge against inflation, as its value tends to rise in line with the cost of living. Over the past few decades, gold prices have soared particularly when stock markets have depreciated.
Gold is thus a key component of any effective diversified investment portfolio, and while its price can fluctuate in the very short-term, over the long-term it is unassailable. Whether its inflation, deflation, interest rate hikes, currency crises or stock market jitters, gold has preserved its value throughout.
Quite simply, it’s the best store of value there is – the ultimate insurance – and notwithstanding the rise of crypto, has remained so for centuries. Gold is any smart investor’s low-risk method of choice to protect and grow their money.
In an unstable economic environment, with the outlook uncertain, gold is a safe bet. Now the question is, where do you keep it?
Look out for part 2…
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