Unexpectedly, 2022 is upon us. We are at the edge of World War III. Financial markets are experiencing historical volatility due to economic sanctions and an escalation in tension between Russia and Ukraine. This comes as the pandemic remains uncontrolled and its lingering effects on logistics and supply chains are not expected to abate.
Global stock markets have suffered a severe blow. Investors are now bracing for possible economic chaos and the business effects war could have on their businesses. Important geopolitical commodities such as oil have seen their value skyrocket.
Gold gains have been steady due to investors moving capital into safe havens when there is uncertainty and high inflation. The highly volatile cryptocurrency market, which was previously tied to stocks, has been decoupled and is now being sought after by oligarchs looking to avoid economic sanctions as well as supporters from both sides who are eager to contribute to its cause. They remain a risky investment because of their past performance linked to stocks.
How will traders be able to survive the financial crisis in 2022 with so many happening globally on the financial markets? We have more details to help traders navigate the turbulent times.
Gold is yours
Precious metals are known for their ability to outperform other assets. Even in times of recession, they perform well and are an investment flight to safety. Gold is an internationally and non-borderless asset and commodity, and plays a crucial geopolitical function globally. Many countries use it to supplement their national currencies or as a global reserve currency, the USD. Gold is the best place to go when any one of these currencies is under stress.
Gold’s use as a monetary asset dates back ages and remains the hard money standard. The price of gold was once the basis for most national currencies. Fiat currencies can be printed today out of thin air, by inflating debt. Inflation is a result. Gold has traditionally been used as a means of combating it. Gold is becoming the preferred choice of investors for protecting their hard-earned capital with high inflation rates reaching 7.5%.
It also performs best in times of uncertainty. Major political events like the US Presidential election or Brexit can cause gold to rise. The recent rise in gold was triggered by the US-China trade war. With the European situation becoming more difficult, it’s once again showing positive results.
A Shaky Stock Market
Although the Fed’s ultra lax monetary policy post-pandemic allowed the stock market to flourish, looming rate hikes cut down recent gains and might have put a pause on performance for some time. The news about the war made markets even more fearful and hit especially hard in emerging markets.
Additional monetary easing could be warranted if the economy suffers further from ongoing war and sanctions, forcing the Fed’s hand during a time when inflation is already dangerously high. The Fed could have to stop rate rises without further monetary growth. Stock market volatility will be a problem for the Fed. Rate hikes could be possible if the European conflict ends sooner than anticipated.
Simply stated, performance could be hampered by the risks surrounding the stock exchange for much of 2022. While it’s unlikely to see more dynamic returns until after 2023 due to the current economic situation, everything is possible.
Commodities Demand
Some restrictions regarding the pandemic have been lifted and the news media has stopped pushing panic about COVID. Its devastating effect on supply chains, logistics, and the currency system continue to cause alarming inflation. The inflation has placed pressure on strategic geopolitical resources that are in high demand and already very scarce.
Energy prices are rising sharply because of a lack of supply and high demand. Natural gas PetroleumThey have seen huge gains, but they are at historical highs. Although they are considered the “hot commodities” at the moment, getting into oil this close to resistance could be a dangerous move. Many nations are nearing taking extensive steps to save their citizens from high oil prices.
When the Ukraine/Russia situation stabilises and Iran releases some oil supply, then energy prices could correct and be closer to normal. Oil prices could rise to new records if the current situation gets worse.
Bitcoin: Make it or break it Moment
It’s a fascinating time for Bitcoin, cryptocurrencies. Bitcoin is touted to be the most effective way to combat inflation, due to its limited supply of 21 million BTC and other attributes similar to digital currency. Despite this, the asset suffered severe losses during the most extreme inflation for decades. Gold is performing well, so safe-haven assets aren’t the problem.
While Bitcoin and other cryptocurrency stars rose to prominence during the boom in stock markets after the Pandemic, there has been a steady correlation between crypto and stock market. This is what has caused cryptocurrencies to plummet. While once marketed as an uncorrelated asset type, the speculative asset category has maintained a strong correlation with stocks for two years. Investors panic buy cryptocurrencies when there is fear or weakness in the markets. This makes them more volatile than stocks.
Yet, the big traders who were not on the crypto train seem to be purchasing each dip. It suggests that the deeper bullish trend in the market hasn’t completely broken. Bitcoin’s price has risen surprisingly as the volumes of local Russian and Ukrainian currency reached new highs. It is possible that anyone could purchase the asset from wealthy local oligarchs to avoid sanctions. While cryptocurrencies may show greater performance than stocks, it will not perform as well as the stock market. However, the best times to invest in cryptocurrency are when your risk appetite has fully returned and when both stock market and crypto growth is back together.
PrimeXBT: How to Trade in Turbulent Times
There are many challenges facing investors and the economy. However, once-in-a lifetime opportunities exist. The current market environment makes it attractive to buy cheaper assets, however this is still extremely risky considering the overall situation worldwide and all other factors. Instead of taking on too much risk, traders can use a mix of short and long positions to hedge risk.
PrimeXBT is an award winning margin trading platform that allows traders to open trades. Both long and briefPositions with leverage across more than 100 trading instruments allow traders to have complete control of their portfolio and safeguard assets against risks. Margin trading reduces risk because traders can put less capital at stake while still taking advantage of current market conditions. It is safer to trade with smaller positions that are less risky and require less capital.
For those that are too fearful at the moment to enter positions yourselves or simply don’t have what it takes to survive these volatile times, there is always the Covesting copy trading module. Covesting’s copy trading module allows followers to connect with top-performing traders via transparent global leaderboards. Only with PrimeXBT and Covesting can followers copy the trades of more experienced traders and profit from those who not only know how to survive in these times –– but know how to thrive in them.