The recent decoupling of cryptocurrencies from stocks could point to a bottom in the crypto market, with Bitcoin (BTC) – despite its famed reputation for volatility – holding up rather well against other assets.
It proves once again the danger of assuming that cryptos will behave like any other risk asset.
Since the end of January, BTC is actually up over 6%, while the S&P 500 and the Nasdaq are both down over 4% and 7%, respectively.
With US consumer inflation now hurtling towards 8% a year, South Africans find themselves in the unusual position of having lower inflation than the US for the first time in nearly four decades.
“Virtually all commodities have shot up in price since the start of the Ukraine war, while stock prices on the Nasdaq have been falling,” says Brett Hope Robertson, Head of Investments at crypto investment platform, Revix.
“The real concern in global stock markets is the inflationary pressures we see in the US, combined with the unprecedented sanctions being imposed by the US and its allies on Russia. It’s unlikely that these inflationary pressures will disappear any time soon.
“Interest rates are starting to rise around the world to contain the inflationary pressures unleashed by Covid, and the subsequent economic recovery. The trouble is that the recovery could well be stalling now as a result of the events in eastern Europe, and stocks are beginning to fall. The fact that Bitcoin has held up rather well against stocks in the last month suggests we may be seeing the bottom of the current pullback in crypto prices, and a decoupling of cryptos from stocks.”
Hope Robertson says those concerned about market volatility should be exploring inflation hedge products such as the Revix Inflation Shield, which is 75% invested in gold and 25% in BTC.
“Gold has long been considered a hedge against inflation and over the last decade BTC has asserted its potential as a digital alternative to gold,” he says. “The Inflation Shield combines the safe-haven and stable nature of gold with the high growth potential of BTC.”
The graphic below shows it achieved nearly 11% over the last 12 months, while gold increased 8.62% and BTC shed 4.46%.
Inflation Shield performance over 12 months
Gold is uncorrelated to other financial assets such as stocks and bonds, which makes it suitable for diversification and helps reduce market volatility, says Hope Robertson.
The Inflation Shield Bundle is algorithmically optimised to maintain a 75%-25% split between gold and BTC. This has been tested over time to deliver consistent, inflation-beating returns.
“The ratio of gold to BTC within the bundle is determined based on a historic risk-versus-return optimisation algorithm,” says Hope Robertson. “The rule-set was created outlining the optimal proportion of gold and BTC that resulted in the highest overall return while minimising negative price movements.”
The Inflation Shield is the latest product release from Revix, which offers a range of theme-based crypto investments, including the Top 10 Bundle (which offers exposure to the top 10 cryptos ranked by market cap), the Smart Contract Bundle (giving exposure to the leading cryptos involved in smart contracts) and the Payments Bundle (providing exposure to those cryptos involved in expediting payments using cryptos and blockchain technologies).
PAX Gold is a digital version of gold
Another way to hedge against volatility is to invest in PAX Gold (PAXG), a digital token offered by Revix that is backed by real gold held in secure vaults. It offers you all the same benefits as traditional gold investing without having to worry about storing, securing or insuring a physical gold bar. Each PAXG token is backed by one fine troy ounce, stored in Brink’s vaults. If you own PAXG, you own the underlying physical gold, held in custody by Paxos Trust Company.
PAXG has stayed true to its assurance as a safe-haven asset and is currently outperforming BTC and the S&P 500. If you had invested PAXG at the beginning of 2022, you would be up 3.88% as opposed to losing 9.53% or 17.05% had you invested in the S&P 500 or BTC, respectively.
Another benefit of buying PAXG is that transaction costs are lower than those associated with the purchase, storage and insurance of physical gold.
You can learn more about the Revix Inflation Shield here.
You can learn more about PAX Gold here.
Revix brings simplicity, trust and great customer service to investing. Its easy-to-use online platform enables anyone to securely own the world’s top investments in just a few clicks. Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.
For more information, please visit www.revix.com
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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