Where is the Crypto Market & Precious Metals Heading in the Upcoming Recession?.

Crypto Market and Precious Metals in the Upcoming Recession Transcript 

Well, here’s what I believe.

I believe that when you look at the biggest growth industries, they’re always the ones that aren’t regulated.  Once government regulations come in, it intrenches the power of the existing companies.

And I’m not going to make this accusation against the cryptos because I’m in no position to do so, but historically speaking, that’s what every other industry does.

Once an industry has become an industry, they then want to entrench their power and keep out competition, and regulations help them to do that. I’m not sure why this industry would be any different.

The big handful of coins and the big handful of, for the lack of better words, brokerages are going to love an increase in regulations. Why wouldn’t they?

That prevents new competition into that market.

Where is the Crypto Market and Precious Metals Heading? 

What are your thoughts on how cryptos are going to go and also precious metals?

Because I’d be interested to hear your take on especially cryptos though.

Hay fever hitting me during our beautiful spring, which is sometimes cold and sometimes warm.

Sorry, Derek, did you want to go first?

Yeah, I’ll just do it pretty quick.

I’m going to go shortly because I’ve got to actually teach a class.

So let me go first.

My view on crypto has changed a little bit. I think a lot of people approach the crypto market with a view to the fact that it was more of an investment.

From that angle, particularly in the early days, it was like, well, it’s an investment in what it’s just created. And I think that’s been the interesting part of it.

I think there are two ways to look at it.

The concern I would have is how much money is already in them because of concerns during the Covid pandemic.

It’s very interesting that during 2019 and 2020, what we saw in 2019 was an inversion of the yield curve that happened many times.

It inverted and then came normal and inverted and came normal, which is normally when it inverts, it indicates that there’s a recession looming.

Okay, but we were coming up to the 2020 elections as well. But why would we see this in 2019? Then all of a sudden we saw Covid.

When that happened, the relationship that we would normally see between the markets, the US dollar bond markets and the gold markets broke down.

And we started to see these things moving in unison. We also started to see bitcoin really moving a lot more in line with things like the Nasdaq than it ever had before.

And that’s continued to be the case recently.

So with precious metals, I think that it probably has got some safety to it. I’m probably not prepared to do a price prediction on it, but then again, I don’t trade like that.

I don’t predict where prices are going to go, as in either going to go up or down. I normally predict the size of the move, not the direction of the move.

In relation to cryptos, cryptos have grown on me over time, but we also know there’s a lot of problems with cryptos, I think for the everyday person that really needs to be ironed out.

We hear about people whose crypto’s accounts have been hacked or they’ve lost their key to their wallets and that means that they can’t access their crypto and all this sort of stuff.

And I think that’s why government wants to intervene into this market. And when that happens, a lot of the things that are currently make crypto attractive, won’t be so attractive anymore. 

People say that crypto is a lower cost of transaction. Yeah, that’s probably correct once you’re in the crypto system. But if you are needing to use a crypto currency or crypto on ramp in order to conduct one transaction and then use an off ramp crypto to feed off ramp.

You’re going to find, I think, I believe, that your costs are going to be far higher than if you just did the transfer by your bank account or on your credit card. Depending on the amount that you’re doing and where it’s going.

It might make sense for small transactions, but people in the West that are investing in cryptos aren’t doing so because they want to make a $1.50 transaction to the Republic of Zimbabwe.

So that’s not what it’s been used for. So people tend to be sort of speculating on it.

Now, we know at the moment that we’re seeing the SCC talk about that they believe that they have jurisdiction over the Ethereum network.

So what does that mean? What is that going to mean overall?

Well, here’s what I believe.

I believe that when you look at the biggest growth industries, they’re always the ones that aren’t regulated. Once government regulations come in, it entrenches the power of the existing companies.

And I’m not going to make this accusation against the cryptos because I’m in no position to do so, but historically speaking, that’s what every other industry does.

Once an industry has become an industry, they then want to entrench their power and keep out competition, and regulations help them to do that.

I’m not sure why this industry would be any different.

You know, the big handful of coins and the big handful of, for the lack of words, brokerages are going to love an increase in regulations.

Why wouldn’t they? That prevents new competition into that market. 

And think about the tech sector. I’m 38. During my lifetime, the tech sector has had the biggest increase of any other industry that’s existed. But much of that increase has happened in a completely unregulated environment.

Before the days of TikTok and Facebook and Instagram and all those sorts of things, we had instant messaging through things called IRC, black and white typing for those of you that are old enough to remember that. Right.

So I don’t think that you’re going to find that this industry is going to be any different.

The likes of Google and Facebook and all those big companies, they love the regulations. They’ll encourage the regulations because it protects their business model. Okay?

And I think that’s probably what we’re likely to see here, which to me takes a lot of the assurances ICQ absolutely IRC was even before ICQ.

But people love lots of things about crypto, but I think what they love is going to very fast dissipate.

The idea of having decentralised finance, some of the applications in the blockchain, certain technologies that I think, will be adopted and I think will be very good. But yeah, I’m not sure. I think crypto, look, if it’s working for you, play around with it. If you want to have a go, have a go.

But I’m not sure that I would put any significant part of my own personal net worth into crypto because one, I’m making enough money elsewhere.

Two, I guess I’m probably a bit of a technophobe, but I don’t really understand what the hell is going on with these cryptos.

But three, and most importantly, is I just think that it’s too dangerous, and I don’t like doing that.

I don’t like just going for these huge punts on things that are unregulated and maybe I lose my money and I don’t know where it went and all that sort of stuff. That’s not where I want to be at this stage in my life. So I tend to shy away from that sort of thing.

The Correlations Between the Crypto market and Stock Market is Changing

I think what’s interesting, too, is it used to see an uncorrelated relationship between stock market and cryptos. 

I think that’s changing now. When the market goes down, crypto is going down.

I think part of that is because we’ve seen a lot of these investment companies mirror what’s going on in the crypto world, because people are wanting exposure to that in their portfolios.

So I think the correlation is actually coming closer when you look at ETFs that are actually trading that. So that’s an interesting development as it gets more mainstream, wider appeal, and also acceptance in the industry that’s developed the last couple of years.

And that could really apply to the NFT world as well. You see the NFT’s go up dramatically, then you see them fall in price, and people say, well, yeah, but  it’s a unique digital picture that only you have. 

Okay? Am I rich? Because I have that? Then if I don’t have it, I’d rather have the unique original copy of the Mona Lisa, it’s worth a couple of billion dollars than to have a unique pixelated picture, looks like it was drawn by a five year old.

There’s obviously made to be made in that industry, but I think you really have to know what you’re doing, and I think you have to be really in that industry, in that digital space to get it.

And I know some young, very smart, very young guys that really know this stuff really well and are making really good money out of it, but it’s just not personally, I’m just not there.

And the question was, what do I think and how do I feel about it? Well, I’m reluctant.

I think investing all that. You’ve really got to understand it and really want to know. The more you understand about it, the lesser risk it is. 

Because people say ‘options trading is really dangerous’. Well, it’s not really, when you look at the history of it, why it was actually embedded, was the hedge portfolios.

But Wall Street being Wall Street likes to speculate on the stuff and I think one of the safeguards that I do in terms of investing is the more I understand what’s on the table and also study the exit strategy out of it, the safer it becomes for me because I understand it.

If I don’t understand something well, it is then it becomes speculative and more of a punt and crypto as far as investments we’re concerned, has always been speculative in my category.

Aiden says the technology that drives the theory will ultimately take over options trading.

It would be a lot more efficient. Certainly would sound like it would be a lot more efficient if it did.

However, I tend to think that’s probably unlikely because of the regulations that are involved with options trading, with how the clearing house operates, with the relationship between the clearing house and the brokers and all that sort of thing.

So whilst you could see much faster settlements and things could be done probably a lot more efficiently. I don’t really think that that’s likely to happen in the long term, short term and in the very long term we’re talking decades from now. I think we’re going to be looking at an entirely different type of technology than just that.

Because even with the blockchain, whilst I think the blockchain is great, at the end of the day, how much computing power are you realistically going to dedicate to the blockchain?

How long are you going to hold that information? There are energy concerns, there’s massive data centres being built.

I tend to think that you’re going to see a bit of a peak in this technology and then you’re going to start to see the best parts of it being used for other applications and other parts of it just kind of fall by the wayside.

Much the same as you have with the internet. Who here uses dial up internet anymore? Does it even exist anymore? Phone banking? Does anybody here actually ring their bank and dial in the numbers? The great technologies, it morphed into something else and the original technology sort of died out.