Are Retail Investors Dumping Crypto for Commodity Investments?

Retail investors turned their backs on cryptocurrencies in favor of commodities during the first quarter

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May 23, 2022
Summary
  • Retail investors have turned to commodities amid the crypto and stock market crash.
  • According to a report published by the Capital.com research team, the number of commodity traders increased in the first quarter while the number of crypto traders declined.
  • The number of equities and index traders remained relatively flat during the quarter.
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The global crypto market is crashing, which has made retail investors nervous according to a recent report published by the Capital.com research team. According to the report, crypto traders swapped cryptocurrencies for commodities during the first quarter of 2022.

The level of the crypto collapse is signified by the current decline in bitcoin price, which has fallen to oscillate around the $30,000 level, down from the highs of $68,990 reached late last year.

This has resulted in a significant decline in cryptocurrency trading activity, as demonstrated below. That traffic seems to have moved to commodity trading with equities, indexes and currencies remaining relatively flat.

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According to the report, the number of commodity traders increased by 29% in March, after a 21% rise in February and a 6% rise in January. Overall, commodity traders on the Capital.com brokerage platform rose by a whopping 66% during the first quarter of 2022 compared to December 2021.

Commenting on the report, Capital.com chief analyst David Jones said, “What we have here is traders chasing momentum in the energy markets by speculating on oil and gas. Separately, there was the traditional flight for safety into gold and dollars, with retail traders following institutional wisdom in this regard.”

Why the crypto exodus?

Since even before Russia's invasion of Ukraine began, oil prices have skyrocketed to hit new multi-decade highs. Therefore, while crypto trading activity seems to be declining, the rapid rise in commodity trades may be due to something different.

Investors seem to be attracted to oil and gas stocks due to the geopolitical situation causing a scarcity in Europe. On the other hand, cryptocurrency prices have been affected by rising cases of security breaches, leading to billions in stolen crypto.

What is more interesting is the fact that gold does not seem to be gaining the same traction as oil and gas, which again suggests rising oil and gas prices are central to the increasing demand for commodities.

While the report ranked crude oil as the most popular instrument traded over the past 12 months, gold was only the fourth most popular in a list of 15 tradable instruments.

The gold price gained just over 20% from November last year to the time it peaked at about $2,070 in March, whereas the WTI crude oil price nearly doubled in price, rallying by more than 99% between December and March.

Oil prices spiked by nearly 50% between February and March 2022, while the price of the yellow metal rose by 15%, all of which coincide with Russia’s invasion of Ukraine. In contrast, the crypto crash started in November of last year, with the first wave of the sell-off ending in January.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure