Bitcoin and cryptocurrency could do no wrong up until November of 2021. And as fast as “The Bitcoin ETF” was launched for trading access to Bitcoin futures prices, 2022 has proven to be a crypto nuclear winter. The reasons are countless beyond inflation, war, rate hikes and so on. The fallout and carnage is now so widespread that even the top Bitcoin evangelists and crypto-evangelists are bleeding out. But what about gold (and what about silver)?
One are that often comes under attack by cryptocurrency enthusiasts is the market for precious metals. It is not that difficult to find images posted on Twitter and other social media postings showing the raw size of a $1 billion worth of gold versus a small thumb-drive that could be holding $1 billion worth of crypto. But is it fair for the crypto-lovers to still be bashing historical juggernauts like gold, silver and other precious metals?
As of June 15, 2022, Bitcoin’s performance of the ProShares Bitcoin Strategy ETF (NYSEArca: BITO) was down 69% from its all-time high last November. And year-to-date, the performance has been -52.5%. The last week alone has seen a drop of 28.8%. Again, the reasons are tooo many to list and they go well beyond the bear market in stocks and the pressure of rising interest rates as the U.S. Federal Reserve is still believed to be in only the early stages of its interest rate hiking tightening (and Fed balance sheet shrinkage) cycle.
It turns out that gold and silver might not be the best performing asset classes of 2022 with oil and commodities surging. Its performance is still rather impressive considering the damage that has been seen in stock prices and traditional assets. The SPDR Gold Shares (NYSEArca: GLD) is the top gold trust of them all with some $62.9 billion in assets under management on last look. With the most recent close at $168.57, this trust is down 12.8% from its 52-week high. On a year-to-date basis, that is actually down just 1.4% and it is down only 3.1% over the last year. Losses of this magnitude are still considered a victory in 2022.
Silver’s price has not held up as well against the price of gold. The iShares Silver Trust (NYSEArca: SLV) is the top trust for “silver ETF” investors with more than $11.5 billion in net assets undermanagement on last look. As of June 15, 2022, the “SLV” was last seen down about 25.5% from its 52-week high and down 9.9% year-to-date. That price is still down 24.5% over the last year.
The one stock that is supposed to be among the strongest crypto-trades of them all is MicroStrategy Incorporated (NASDAQ: MSTR). The most recent close f $156.87 has been tied to the drop in Bitcoin and crypto prices in general, but rumors of margin call risk have also been denied in many online reports. MicroStrategy shares are down 71.2% year-to-date and are down 75.1% from this time a year ago.
Collectors Dashboard would point out that all traditional assets have seen a very weak 2022. Here is just some of the top index performances year-to-date and versus their 52-week highs as of the morning of June 15, 2022:
- S&P 500 at -21.3% YTD and -22.1% from its highs!
- DJIA -16.2% YTD and -17.7% from its highs!
- NASDAQ-100 at -30.6% YTD and -32.5% from its highs!
And this is the sector-by-sector performance year-to-date measured by the top ETFs:
- Financials (XLF) -19.9% YTD!
- Utilities (XLU) -7.3%!
- Materials (XLB) -14% YTD!
- Industrials (XLI) -16.9% YTD!
- Tech Stocks (XLK) -27.5% YTD!
- Healthcare (XLV) -14.45% YTD!
- Dividends & Buybacks (DIVB) -15.7% YTD!
- S&P 500 Dividend Aristocrats -14.1% YTD!
But there are some serious winners in oil and gas… Energy stocks (XLE) +51.8% YTD, Oil & Gas stocks (DIG) +111% YTD, and oil and gas services (OIH) +43.5% YTD!
The bear market in stocks for 2022 has only been confirmed in recent trading days. Unfortunately, it is currently expected that the Fed’s interest rate tightening cycle will go at least the rest of 2022 as fears of persistent inflationary pressures necessitate rate hikes even at the expense of a U.S. recession.
There are some additional lessons to learn from Bear Markets in stocks with their 20% loss threshold. Not all bear markets have to be considered a stock market crash (traditionally -50% in value!). A 90+ year analysis by Hartford Funds has shown that bear markets typically endure 289 days before their 20% recovery marks their end. And the 20% drop in the Dow and the 17% drop in the S&P 500 as of this time are against a backdrop of a typical 35.6% drop from peak to trough.