Key Takeaways:
- Cash outpaces stocks in August, with 0.4% returns.
- The stock market is not out of the woods, some experts believe.
- Can the crypto market offer a hedge against the instability?
YEREVAN(CoinChapter.com) — Cash has emerged as the most profitable investment in August 2023, according to data collected by TopDownCharts.com.
Holding cash returned investors with a 0.4% gain, surpassing returns offered by other asset classes, including equities, commodities, US Treasuries, and iShares TIPS Bond ETF. The performance underscored a declining appetite for riskier assets in favor of perceived safe havens.
Stocks partially pare their losses, but the bearish outlook stands
The US benchmark S&P 500 dropped 1.77% in August, logging its worst monthly performance since February 2023.
Meanwhile, Wall Street began to warn of a recession and corresponding stock-market selloff as early as April 2022. Things were supposed to get ugly, and soon. However, the stocks soared nearly 19% year-to-date. The uptrend prompted economists at Goldman Sachs, Bank of America, and JPMorgan to say a recession will not happen this year or in 2024.
Equities have further to fall?
However, Michael Kantrowitz, the chief investment strategist at Piper Sandler, disagrees. “To say today that we’re going to have a soft landing is so premature. History tells you you really can’t make that assessment,” he commented.
Bob Doll, the chief investment officer at Crossmark Global Investments and a former chief US equity strategist at BlackRock, also asserted that the full impact has yet to be felt.
To think that the only consequence is that a couple banks go under in the middle of March for about a day and a half, and then we move on our merry way, I think is a little naive.
said Doll.
So, should investors park in the cash markets or the stocks? Consistent with the historic chart above, cash might not be king for long, and the stocks could still experience another leg down. What about the crypto market?
Cryptocurrency sector’s euphoria over Grayscale win subsided – what’s next?
The leading cryptocurrency, Bitcoin, lost over 12% of its valuation throughout August and receded back to the $26,000 support on Sep 1. Moreover, the alpha crypto slid over 7% on Aug 30-31. The correction followed a 10% pump inspired by Grayscale’s win in court against the US Securities and Exchange Commission (SEC) on Aug 28.
As Miles Deutscher, a crypto analyst, noted in a recent tweet, the Grayscale euphoria lasted only 50 hours, similar to the previous elation over the Ripple/SEC case. The “sell the news” strategy speaks volumes about the overall climate of the market.
The Bitcoin tumble took the rest of the crypto market along for the ride. The digital sector as a whole lost 11% of its collective valuation in August, reaching a market cap of $1.02 trillion on Sep 1, a loss of $135 billion. Notably, the market downturn effectively erased the gains acquired since June 18.
Bitcoin recovery in 2023 is not a given
Despite bullish on-chain metrics, Bitcoin faced a slew of headwinds, which could tumble the whole crypto market. With a market cap north of $530 billion, Bitcoin is vulnerable to unfavorable macroeconomic conditions mentioned above.
Furthermore, investors have caught on to the dangers as well, judging by the three-year low trading volumes.
Julio Moreno, head of research at CryptoQuant, told CNBC that the departure is consistent with any bear market.
Trading volumes decrease in bear markets as retail investors leave. This happened during 2022 on most exchanges. As we progress further into a bull market, the trading volume may continue to pick up.
he asserted.
The low volumes are not necessarily bearish, as they could signify traders’ inclination to HODL rather than exchange. However, the markets might be waiting for an additional nudge after the low volatility season.
Conclusion
From the three presented asset classes, cash appears to offer the best short-term conditions for investors, with the highest returns. Meanwhile, stocks and crypto, despite the year-to-date success, are still susceptible to macro dangers at play.
As mentioned, cash doesn’t hold a candle to large-cap stocks in the long haul. Moreover, experts disagree on whether risk-on assets will face more challenges before 2024. Thus, traders should proceed with caution and consider the viability of their market strategies before making a move.
