Cryptocurrency Crash Benefits Gold / Commodities / Gold and Silver 2021
This week has been trulybrutal for the entire cryptocurrency sector, with the prices of majorcurrencies like Bitcoin and Ethereum crashing at least 30%. Theoverall sector has shed trillions of dollars in value.
The recent carnage forholders of digital currencies could be due to a variety of factors includingprofit taking spurred by Elon Musk, an easing of inflation worries, or concernsabout new regulations coming down the pike.
Whatever the case may be,some of the capital that recently left the crypto space has found its way intothe gold and silver markets. This trend could continueas well, with precious metals gathering strength and with Bitcoin still havingplenty of room to fall further.
Bitcoin hit its lowestprice since January as the People’s Bank of China has reiterated its view thatthe tokens cannot be accepted as a form of payment.
Since 2017, China hasbecome an increasingly difficult adversary for cryptocurrencies and virtualproducts. The communist nation has banned initial coin offerings while alsoforcing many exchanges to move overseas.
Chinahas been known to implement capital controls as it seeks to control the ebb andflow of currency within its borders.
A cryptocurrency can makethese controls impossible to execute, however, as funds can be swiftly andeasily transferred overseas.
The only digital currencythat would allow China to maintain capital controls would be the issuance ofits own digital currency. China has reportedly already taken steps to introduceits own digital yuan, and the country looks to become more aggressive in thespace.
In addition to China, theBitcoin and crypto markets have also been negatively impacted by comments fromTesla chief Elon Musk.
Tesla recently purchased alarge sum of Bitcoin as Musk seemingly wanted to push the use of the currency.Tesla has, however, reportedly retracted the notion that it will accept Bitcoinas payment.
Further commentary by Muskover the last several days has only added to the confusion.
The uncertainty surroundingcryptocurrencies has provided the gold market another boost. Although cryptosmay be unregulated and can act as a hedge against rising inflation or weakerpaper currencies, they do not have the long, reliable history that gold bulliondoes.
Given gold’s timeless roleas a store of value and protector of wealth, some investors concerned aboutlong-term capital preservation are likely to reconsider their affinity digitalassets and turn toward bullion instead.
Meanwhile, rising MiddleEast conflicts are also fueling gold’s recent rise.
Israeli warplanes poundedGaza this week in the face of Hamas rocket attacks on Israel, and anyescalation in the conflict will underpin the bull case for precious metals.
To be sure, the currenteconomic and geopolitical backdrops – while negative in many ways – are highlypositive for gold and silver. But they’ve always been a hedge for turmoil.
Ifyou already own some physical gold and silver bullion, now may be a good timeto consider adding more. For those who do not currently own any of the monetarymetals, it’s hard to imagine what else they could be waiting for!Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2021 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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