As the crypto world grapples with an ever-falling market, investors are searching for alternative avenues to invest their wealth. Namely, in asset classes with low volatility that offer not only a fair return but also a hope for a better future. A future with safety and tranquillity that can weather the tides of a pandemic and the Russian war-torn equities market.
Last week, TerraUSD and Luna, the largest stable coins by market capitalization, crashed in a matter of 48 hours. Luna went from trading well over USD 100 to nearly $0.00. Its sister coin, the stable coin Terra, which is pegged to the US dollar, fell to only a few cents. This gargantuan crash caused the remaining crypto market to fall alongside it with major coins Bitcoin and Ethereum falling by an additional 25% in value.
Altcoins weren’t spared in the great crypto crash of 2022, Ethereum rivals Cardano and Solana also dropped an additional 30% in value. The entire market lost well over $400 billion.
With this in mind, we are offering food for thought on your investing journey. Offering alternative avenues to invest your wealth and assets into so that you don’t get caught in the next crypto market crash when it inevitably happens.
Should I Invest In the Equities Market?
The bull run so many investors have been excited about is finally ending – or is it? After nearly 8 months of strong gains for the equities market, the U.S. stock market is finally leveling out as companies report their 1st quarter this May. And unfortunately, we see a few tumbles from the S&P 500 down 4.8% and the Dow Jones and Nasdaq Composite posting their lowest numbers since the end of last year.
These numbers reflect an American population that is spending less this early summer season but also that fear around the Russian/Ukrainian war and that the COVID pandemic hasn’t completely dissipated. With uncertainty in the stock market, advisors are encouraging diversification of client portfolios, opting for alternative assets like real estate, where there is lower volatility and downside protection if the stock market continues to struggle for the rest of 2022.
Commodities Continue to Surge
Commodities are a safe investment because of their close relationship with food and agriculture. Two stables that the world will always require, especially during a crypto market crash or during market downturns.
Speaking of certainty, this may come as no surprise, but the commodities market surged this year with more and more people staying at home. This increase in at-home workers and families led to an increase in energy demands, prompting the highest natural gas and coal prices since 2011.
The World Bank also expects the commodity market to average a dramatic 80 percent increase from last year, citing climate change, higher energy demand, and a global population that is moving away from the rural and into metropolitan areas. However, the World Bank predicts agriculture and metals to decrease in 2022, following strong gains in 2021.
A Safe Haven in Real Estate
Real estate is one of the best places to pour your wealth into after a shaky crypto market threatens everything. As of the time of writing, mortgage rates are at a record low and inventory is incredibly scarce, all because of a well-performing job market, an increase in savings, and interest rates that are helping the average American purchase a home.
Across the nation, there is a high demand for homes. And as Millennials approach the prime of their home-buying years, more and more homes are being sold.
This year, you can expect a more diverse set of up-and-coming cities. Primarily led by a more remote workforce that now understands they can work from any city, no longer are finance and entertainment hubs like NYC and LA are a necessity. In fact, neither made the list for PWC’s 2022 Emerging Trends in Real Estate Report. The top five cities to keep an eye out for real estate are Nashville, Raleigh, Phoenix, Austin, and Tampa.
Consider The Safety Net of Government Bonds
Bonds, the haven for every investor when the stock market is having a poor season—this might just be one of those years to a second gander at bonds as the equities market closes off lower than expected. But remember, not all bonds are made the same, high-yield bonds are incredibly correlated with equities. Instead, try focusing on government-backed bonds like the Vanguard Total Bond Fund which is composed of 65% of U.S. government bonds.
The Fed is also promising to continue buying a minimum of $120 billion of Treasury bonds and mortgage-backed securities monthly for the rest of the year. Quailing any fears of inflation as just transitory and in 2022 if things continue to look up, there will be a lift of short-term rates and they will begin tapering their bond-buying program.
Alternate Crypto Investing Conclusion
The crypto world will continue to grapple with a war in Ukraine, and a volatile stable coin market, but with vaccines now a staple across the largest metropolitan areas in the world and a hopeful populous this Summer, you can expect to see a calmer population and an increase in consumer spending across the board. And as new technologies continue to spring up every day, pay special attention to the robust tech sphere and how NFTs change how we define ownership.
With all of that being said, remember that no asset class is complete without its risk and times are uncertain as a whole. The best investing consideration to weather the crypto crash of 2022 will be a diverse portfolio with assets across all the major classes. As the adage goes, “don’t pull all of your eggs in one basket.”
