The S&P500 hit a peak of 1576 in October 2007 and it was almost all downhill from there. There was a bounce in the market before the summer hit, but then continued it's bearish descent.
With Bear Sterns and Lehman Brothers bankruptcies looming over the markets, the S&P continued into the depths of the bear market and bottomed in March 2009 of ~666, a ~58% drop.
Monthly chart of the S&P500
In March 2008, Gold hit an all time high of 1029, piercing the 1000 mark for the first time. After a 2 month pullback, it peaked at 988 in July and headed into a bear market afterwards which bottomed at 691 in October, a 30% drop as it followed the bearish conventional markets.
Weekly chart of Gold (Candlesticks) and S&P500 (Purple line)
Is it true that Gold is seen as a 'safe-haven' when conventional financial assets are tanking? It is a commodity, not a stock or ETF... But it was taken down with the conventional markets in 2008. This may be due to investors that were on margin and received margin calls, forcing them to sell any asset they had to meet the debt obligations.
Many believe the next economic downturn will be larger than the 2008/2009 bear market. If / when it does happen, many people will be on margin just like 8 years ago, so are we going to see the same thing happen to Gold? A ~30% or more sell off?
Bring in Bitcoin and the cryptos... They were not around during the last downturn, but will be this time. Because they are decentralized with no ties to any financial markets around the world, they will most likely behave differently during the next economic depression.
Does that mean they will go up? Nobody knows for sure because this will be the first time they are around during a time of financial uncertainty. One benefit is that they cannot be naked shorted or just plain shorted like stocks or futures, so people cannot pile in short on the decline. But Bitcoin and others have demonstrated huge selloffs in the past, so a potential decline into USD's or the local currency is possible.
I would speculate that if people are bailing out of the conventional markets and see Bitcoin appreciating during this time, it may entice them to purchase the virtual currency, even if is a small percentage of their portfolio.... They would have to be investors that would have a higher risk tolerance as many will probably hold onto cash until the bloodbath is over. (This may be a while)
One possible hindrance to investing into BTC and other cryptos is that a new account must be opened and verified, this can take days to weeks, especially when (if) a flood into the crypto space has started.
Another issue can be storing the tokens and the movement from an exchange to a wallet as everyone will have a learning curve and potential mistakes can be made. Hackers will be on the lookout to steal tokens from the unwary.
Thoughts?