3-Min. Weekly Market Sentiment Wrap-Up — May 1st

In last week post, I shared my medium-term bearish bias which has, is, will probably keep on playing out.

The view hasn’t changed. The dire Russo-Ukrainian situation, the impact on commodities prices and so energy cost of production in Europe, messed up supply chains, the unrelated but no less impactful covid-related lockdowns in China, the rampant inflation, etc.

We’re seeing the US dollar rising with no abating, central banks raising rates despite clearly being in or entering a recession. And of course, bond prices are down, equities are down, -believe it or not- gold is down, real estate is down, crypto is down.

Today’s focus looks at investing from another angle: a longer term angle, and, the idea that if most assets are suffering, the impetus is now on allocating to discounted assets that hold true value, might still go down further but will, in the long run, offer the best risk-to-reward ratio.

Many people want to buy low and sell high, yet, fail miserably. The basic fact is this: things go low when the environment is bad/menacing ; things go up when the environment is positive/optimistic.

This moment, when thing go down and investors are plagued by fear is that moment to buy low.

In one-go? No. But one can take a new look at allocating or averaging in the further down we go.

I’m looking at gold, tech stocks and crypto.

Working and being heavily invested in crypto, people often assume that I would prioritise Bitcoin or Ethereum at the expense of gold. I do in part but I recognize that gold has a much longer history and also a much more liquid market. Those shouldn’t be overlooked. I believe that gold will continue to rise as people look for decentralized, peer-to-peer, stores of value. Especially government that would look for a time-tested non-USD and non-EUR mean of exchange.

Tech is also a favoured investment basket. It’s getting a bad rep right now -but that’s why it’s becoming so attractive (read: so discounted). At the end of the day, it boils down to whether you think the next one, two, three decades will be led by digital/technological advances or by manual/analogue inventions. I believe that the time of the light bulb, the TV, the airplane, while in and of themselves transformational for society, won’t be the innovations that generate the most value in the XXIst century. I would rather bet on fintech, AI, 3D-printing, blockchain, robotic and automation, genomics, automated driving, etc.

Onto the good stuff: crypto.

The reason why I have been and will remain a happy buyer of quality blockchain projects and cryptocurrencies is for the following: in my short -15 years- investment career, there have been rare occasions where market pessimism dragged specific assets down, even though they were actually doing well.

I believe this is happening in the crypto space.

I’m aware of my potential (probably very real bias) but I don’t see the root of selling of crypto, besides the obvious withdrawing of liquidity and the increase in central bank rates that weigh on more speculative assets.

This is no small impact and so, to a certain extent, I understand traders fleeing to safety.

For the long-term investor, though, I look at the below and wonder:

• Bitcoin’s hashrate hitting new all-time highs
• Number of new addresses growing
• Several government looking to enable crypto payments as legal tender
• VC funds raising excess capital to be poured into crypto projects
• Banks adding resources to experimental cryptocurrencies teams
• Banks adding real capabilities for trading crypto assets
• An abundance of crypto-linked investment products and a long list of applications for ETFs and other instruments.
• Companies holding crypto on their balance sheet
• More platforms looking to enable user transfers of cryptocurrencies
• The inexorable rise of Web3/DeFi protocols that offer real value to users (gamefi, socialfi, access to yields, etc.)

Similarly to my view on tech, in the previous section, the question now is whether we think that crypto is a failed experiment and is on a slow course to zero, or, if the next one, two, three decades will continue to be impacted by crypto. If the latter, the amount of adoption is just set to grow, and the amount of capital flowing to the space as well.

Naturally, the above requires a certain level of capital, income stability, time-horizon and emotional resilience.

But this where the opportunity is, where some of the ‘the rich get richer’ comes from, and if you can be part of that process, you can build a strong base of wealth for the future. It just won’t come quick… or will it?

Again, to reiterate the previous posts and earlier sections on this page, the outlook remains bearish for the next 3–6 months, but, we can’t time the bottom perfectly and one will need to start accumulating at the non-optimal time to be sure to also not miss decent entry prices (which might look an absolute steal three years from now).