For the past few weeks I’ve incurred the wrath of what I’m now calling “Gold-Only” bugs for constantly haranguing them about bitcoin and cryptocurrencies. These are the folks which state only gold can beat the central banks.
I’ve made my position very clear, in a world of digital money and accelerating technology there is room for both assets as stores-of-value for different types of investors and taking a ideological position for either is stupid as well as arrogant.
Like all things, there are reasons why putting all of your eggs in one basket in markets as cocked-up and purposefully manipulated as these is simply bad asset management. Risk is, ultimately, not someone else’s problem no matter how much Wall St. tries to convince of this otherwise.
Risk is your problem.
The gold and crypto communities have been at each other’s throats for months now, as bitcoin continued rallying off the Coronapocalypse low from last March while gold peaked in August and has ground out a truly demoralizing eight-month bear market.
The envy coming from Gold-Only bugs has them missing one of the great opportunities for wealth creation in anyone’s lifetime. You don’t have to love bitcoin to make money from it. Just like you can hate Facebook but own its stock and cash it in when it’s too expensive versus another asset, say… I don’t know? Gold?
But that inverse relationship is finally changing. Bitcoin and gold are getting back into phase. And it’s right on schedule.
Gold double-bottomed a few weeks ago in the $1670 area and since then a number of small announcements gave it some spine, mostly coming from China — allowing its commercial banks to import up to 150 tonnes of gold. That stabilized the price while at the same time Bitcoin has been building a new base between $48,000 and $64,000.
Consolidation is the word of the day. Both bullish but coming off of different recent trends.
Gold is the standard by which all store-of-value assets is judged. Those that make their living hanging on every word from the Fed are looking at their traditional cross-asset valuation models, seeing U.S. real interest rates rise and had no interest in bidding up gold.
To many of them this bitcoin thing isn’t a real market. Cryptos are a tulip bubble and no one serious takes it seriously. They rightly see the insane situation in Dogecoin and simply have zero frame of reference for what’s going on out there.
Humans are really good at a few things and one of them is rejecting outright something more than one standard deviation away from their previous experience. Dogecoin is something even us veteran crypto advocates look at and shake our heads.
For the past six months however, that perception has slowly changed as one big institution after another bows to bitcoin’s strength and the demand for it. On the best of days those of us in the crypto space have a hard time keeping up with the speed of adoption and the proliferation of new investment products, aspirational projects etc.
So I don’t blame these guys for looking at a sagging gold price and thinking the central banks still have things well in hand. They’ve been telling us inflation is tamed and the recovery is coming as we pull out of the lockdowns. Bitcoin may have been screaming otherwise, but gold wasn’t, so you go with what you know, right?
And then that narrative collapsed.
Today’s horrific jobs report finally revealed the reality behind the recovery narrative. 266,000 jobs. Not nearly 1 million. As Zerohedge points out, a 3.7 sigma miss.
To make matters worse, revisions to the February and March’s data nearly wiped out April’s net gains.
Reality slapped everyone in the face. Gold spiked, bonds were bid. The dollar dumped and everyone is looking at the Fed going, WTF Powell?
The reason there is no jobs recovery is because the U.S. government, on the orders of The Davos Crowd are paying people to stay home. Why work when you can live rent-free in someone else’s house protected from eviction?
Why work when the government will pay you nearly as much to stay home?
This jobs report validates everything libertarians and Austrian economists have been saying about minimum wage laws for two generations and turned it into a cartoon. Moreover, this is happening while cost-push inflation for real goods is running far ahead of whatever heuristically-adjusted nonsense they call the CPI says.
The numbers coming out of the equations may be right but the assumptions behind the equations are wrong.
That’s been the “Gold-Only” Bug’s argument and it’s also the Bitcoiners’ argument.
I’ve said this before, it’s a GIGO economy. Garbage in equals garbage out until you finally stop believing the garbage isn’t foie gras. Look up Rene Girard’s Memetic Collapse and you may finally realize how important today’s jobs report was.
And because of that all of a sudden those guys who thought real yields were somehow positive are now radically revising their models based on real world data which says the exact opposite. As such, gold has quickly left $1800 in the rearview mirror and should now be one its way back to the August all-time high.
Today there is now the slowly dawning realization by so many big name money managers that both the Gold Bugs and the Bitcoiners may have been right all along. Gold and bitcoin are the safe havens from central banks and government operatives hell bent on changing the rules of the economy completely.
They are now coming out and complaining about stimulus and support screwing up the labor market. Job openings are at record levels while the Biden administration continues trying to keep everyone at home rather than go back to work.
This is The Davos Crowd’s Great Reset in real terms. This was all part of the plan, folks. Supply chains of basic goods and services are breaking down all over the place and still these people want to keep us locked in our homes until we all get their DNA-altering jabs against COVID-19 which we’re still supposed to be scared of.
That narrative is more unbelievable than the plots of most stuff you find on PornHub for pity’s sake.
That narrative is used to justify, in effect, Universal Basic Income and the destruction of risk capital as an asset class. Let’s just give everyone new digits without backing and send them out to buy another two-liter of Woke-a-Cola Classic, order a cardboard pizza, Netflix and chill.
While denying the reality that in places where there are no mask mandates and no lockdowns the COVID-19 numbers are irrelevant. At this point we are trying to tease signal out of noise. Every day more and more people are tired of it while the corporations who were promised a rose garden by Klaus Schwab continue to try to force everyone to accept masks, social distancing and vaccine passports as the New Normal.
But that New Normal is quickly morphing from The Great Reset to the Great Reject as the revolt against this, frankly, adolescent view of humanity is fought by enough people to ensure its abject failure from here out.
We live in a narrative-driven world created by half-truths and outright lies. The “Gold-Only” Bugs have things mostly right, their desire for the world to get back to things that are ‘real.’ I get it and share it with them. As I said in a recent post, however, reality isn’t only that which was but also incorporates what is and what will be.
In fact, that’s the whole purpose of human endeavor, to turn today’s dreams into tomorrow’s reality. It doesn’t matter which tools we use to get us there, only that we use the right tool for the right task at the right time. Gold’s Achilles’ heel has always been its lack of yield which allowed the central planners to destroy its ability to keep its network of users from collapsing. Once that was achieved divorcing the derivatives, national currencies, from it was child’s play.
Today bitcoin is assisting gold find its place back into the world’s monetary system. It’s helping accelerate the realization by a critical mass of people that those in charge hate us, and only want us around if we kowtow to them as digital serfs in a dying world. They believe they can leave us behind by walling us off from the gifts of their world.
But those gifts are shackles, of the mind, body and spirit.
Meanwhile the “Gold Only” Bugs are still hunkered down while the Bitcoiners and those with a foot in both camps are building new alternatives to the digital serfdom of The Davos Crowd.
Returning to a world of real ownership and custody begets a world of responsibility and discipline. Bitcoin and cryptocurrencies have, like all other technologies, the capacity to become corrupted and that’s why gold should always be there to keep us in line.
As The Great Reset unravels and the central banks’ fail to outcompete bitcoin and cryptos, there will come a day where today’s gold reserves, which they control, become the last line of defense for governments intent on maintaining control. And that’s when things really get interesting.
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The country and world are beginning to understand Biden-flation.
Expect AOC to call for price controls to stop greedy farmers, food producers and supermarkets. Meanwhile, she will call for stimmy checks for hard hit constituents.
Yup. Price controls because of evil price gougers.
Couldn’t find your email… I figured this was the best way to get your attention.
Apologies to the thread folks and you Tom.
https://talkmarkets.com/content/commodities/the-end-of-paper-gold-and-silver-markets?post=312777
Bravo. Never could understand the gold-only crowd. It’s like everything the gold-crowd has wished for is being delivered to them on a silver platter in BTC, but they won’t see it. It’s like a religion of sorts. Within 1 hour of finally learning (alas not in 2010 haha) the nuts and bolts of what BTC is, I was sold. I could see it’s potential to undermine the regime some day. To what extent that happens, we’ll see. I see no reason not to accumulate both. I am far more content to save in these two forms than to have dollars sitting in a savings account earning 0.3% interest while the FED creates more and more “money”. Honestly I am even hesitant to put much in stocks either. Which do I expect to perform better over the next 10 yrs, BTC or the stock market? It’s kind of a no-brainer. If I had more guts and I was in my 20s I’d put every penny in BTC. I’m bullish but I guess without enough guts to go all-in now that I’m older.
Never put all your eggs in one basket. Accumulate, stake, diversify, take profits, rotate back into things you need. Build wealth without emotion and you’ll do great.
What I need is more bitcoin :)
(half serious, half joking)
But thanks, I appreciate the advice.
BTC has the brand and first mover advantage. But it is also ossified – and more importantly not private.
There is a ‘green’ narrative being applied to BTC … coins mined in China are not mined with ‘green energy’ so they are tainted … calling the them ‘bloodcoins’ … stuff mined by the good guys using green energy are ok though and clearly worth more than bloodcoins – especially since China owns a lot of them and the USA doesn’t … see Kevin O’Leary’s comments for details.
If that sort of narrative gains hold, then BTC transactions can and will be censored at the exchanges… so a fully transparent ledger is terrible for fungibiity .. and that is almost all crypto coins.
The standout alternative coin where that that problem does not exist is Monero (XMR) … it’s “opt-out” privacy is vastly superior to “opt-in” solutions by dramatically increasing the anonymity set of each transaction.
I appreciate your thoughts. You seem sure about some things that I don’t have full clarity on yet.
The argument that BTC is now the old clunker is not new. This old beater has been hanging in there for quite some time now and is rather battle worn and tested. Whether it survives or some new coin gains dominance is not exactly certain. Personally I suspect BTC will remain a central pillar with an ecosystem of other coins / tokens / protocols / systems surrounding it for transactions in various markets. I am thin on details. And I am no maxi.
Regarding privacy, it is an interesting question. I think just like everything else in our lives, there are people with varying degrees of requirements, and within a given individuals day to day activities, differing levels of care. I don’t really care who knows I bought Subway sandwich and coke at 123 Main St on Thursday. I’d prefer that say, a gift to my son or sister etc, be 100% private. It seems there will not be one one-size-fits-all coin for all transactions and IMHO that’s fine. I guess this was a long-winded way to say I am not convinced 100% privacy is required. I guess we’ll see. Also, layers to the BTC process might achieve this later.
The dirty coin fuss is ridiculous and I have no worries about this whatsoever. It sounds like the latest wokesterism. I heard a stat that BTC is the cleanest form of currency yet, with up to 30% supported by solar and wind. (I did not fact check this, so it may be bunk.)
Censorship at the exchanges is now a concern. Will it be in 5-10 years? What if amazon and ebay both allow purchases in BTC. Will we need dollars eventually? In my opinion exchanges will become very peripheral, secondary entities. How much of this is reasoning and how much is hope? I am not sure.
Re: XMR…yes! I have some and have played around with it. I am also very excited about ARRR. I have dipped my toes in there as well.
Cheers.
How about a hattip to silver, Tom?
Great piece Tom – agree with almost all.
Of course gold and bitcoin are equally vulnerable to outlawing and windfall taxes, but gold has one strength that crypto doesn’t.
The psychotic Davos Crowd don’t covet it.
Because they control thousands of tons of it already.
But private crypto stands in the way of their new CBDC, and must be dealt with.
Even if they won’t succeed, surely you understand that they will TRY?
HODLers who conflate the security of their asset with their own are about to find out that not being able to PREVENT an activity has never stopped globalists from outlawing it.
And demonising those that persist in it.
Ivor,
I appreciate the perspective, but I think you underestimate the people working in this space.
Of course they will TRY! DUH!
And they will attempt to do as much damage as they can. But, do you realize that they’ve already TRIED multiple times THIS YEAR and failed completely?
Everyone is so fucking scared of them but when you realize that they haven’t gotten the Pirate Bay or 4CHAN they’re not going to get something that has:
1) Chinese gov’t backing at a time when the Chinese are playing hardball against them
2) more than $2.5 trillion in market value with the incentives aligned and a growing network to build protections in with them.
This is what I’m calling Monetary Stockholm Syndrome … And they really want us to believe they are so much more than they actually are.
I see things splintering on them quickly. They will strike back in ways that are increasingly desperate… we’re already seeing that. Genzler’s pathetic comments the other day are a prime example.
What they are doing now isn’t trying to outlaw cryptos (they’ve already tried that and failed), what they are trying to do now is ACCUMULATE bitcoin to control it still thinking that everything is a derivative of bitcoin liquidity.
That’s mostly true but getting less true by the day. So, that window is closing as wel.
That would be nice., but I suspect they have barely begun. And they couldn’t care less about filesharing and darkweb – those are not existential threats to them. Bad comparison.
Just wargaming their likely actions, what should we do when they get serious and launch their own version (Diem?), outlaw private cryptocurrency, close the major exchanges, offer an amnesty for private crypto in exchange for Diems, impose windfall taxes on any private crypto holdings/transactions after the amnesty is over, and demonise as “domestic extremists” those HODLers unwilling to migrate to their version?
Because I suspect they will try all of that.
To avoid the total loss of their power they will throw everything at this, right?
Do you see a day soon where private crypto eludes all those countermeasures and the mainstream adopts it so you can actually buy and sell with enough merchants using it? Won’t those merchants be swiftly targeted?
Thanks – I dearly wished that private crypto could be the tool for prising these demonic narcissists off the levers of power, but most analysis I see from the cryptocrowd seems entirely superficial first-order thinking.
We surely need to plan our reactions to their reactions, not just assume our awesomeness and their passivity will grant us victory?
In short Ivor I do think they will do anything and everything including start WWIII with Russia to maintain their power.
I also think that as their problems multiply they will lose control over things they think they have buttoned up far quicker than they realize. In fact, I see this happening now.
Lastly, knowing what I know about how this technology works, they cannot stop it without undermining their own power. Driving Private Cryptos underground will only make them stronger as all of that value will then need to find a way around, i.e. the HODL’ed assets will circulate for it will have no other choice… and then they really lose.
I’ve thought about all of this and I’ve seen what they think they can throw at us… and I’m telling you they are freaking the fuck right out now because this thing was supposed to break in Q1.
And now gold is beating them up. Their better play rather than going scorched earth is to begin accumulating and control the price rise, a la gold. But to do that means sending BTC to a high of around $300k this year (or higher) to begin that process.
“own its stock and cash it in when it’s too expensive versus another asset”
explain what Bitcoin is worth and how you reached that valuation so I can know how to value it against other “assets”.. I’ll wait.
No.
That’s a bullshit argument. What’s a dollar worth? What’s an ounce of gold worth?
I’ll wait.
Bitcoin simply tokenizes the work done to generate electricity (which is a stand in for human work) to produce a product, no different than gold or any other money.
In fact, it does it far more efficiently than gold does.
So, once you think through the problem you’ll see exactly what a bitcoin is worth. I’ve given you the clue, now do the work.
I’ll wait.
Your reply is kind of insulting, indicating emotion. I asked simple questions: “What’s it worth? How to value it”? If it cannot be accurately valued, how can I know when it is overvalued? Undervalued? Buy? Sell? So while we’re insulting each other, the “production cost” myth is laughable.
Digital currency is coming, that much is undeniable. And it will be just as corrupt / corruptable as any other fiat. Is there an acceptance coming for digital currencies, will they ultimately be accepted as currency? Yes. Store of Value? Maybe.
Here is what I believe, you of course may believe what you wish;
1..Bitcoin is an Op, whose purpose is to take the buying pressure off gold, to help soak up the $Trillions the central banks knew they would need to print while keeping it somewhere the IRS can see. It even has its own mythology (Satoshi somebody). It is cleverly designed to get millenials and GenXers to buy it instead of precious metals because it is digital, and they believe putting a computer chip in everything makes it better.
2. Bitcoin is a trade
3. Bitcoin is NOT confidential
4. Bitcoin is NOT money
5. Bitcoin was designed to attract attention by its very design: limited supply with a known finite amount to be ever produced. This, along with hype, is guaranteed to produce a rising price.
Have a nice day. I hope you get rich off the stuff by knowing when to sell it.
If we want to know what TPTB want us invested in, you only need to turn on the mainstream financial media.
Where you will find crypto cheerleading all day every day.
When CNBC is in your corner…………….you’re in the wrong corner.
Agreed.
Couldn’t crypto price be government controlled via the futures market with pump and dump, interest rate management or any other hook or crook measures they use today.
That’s what they are going to try and do. There are a lot of coins to control if they destroy price discovery for bitcoin
Great stuff, Tom. I think what is lost on a lot of the commenters here is the shear breadth, depth, and genius on display across the crypto development community. I’m in more awe of it every day. Of course everyone is concerned about the two first movers (BTC and ETH), but they are already in many ways lost causes as practical tools beyond speculative investment.
But just thinking about a next gen project like Pirate Chain, which grows out of a small volunteer community and solves crypto’s fungibility problem. Or like Ergo, which builds oracle and UTXO innovation on top of the BTC’s strengths with a core team of like three guys. Steering the big two is hard enough, but how do the statists in leadership stifle the broader crypto ecosystem when major advancements come from small, motivated, independent groups?
I don’t think they can. And when they eventually show their hands with the statist alternatives (CDBC’s), they’ll be such inferior tech and so odious that people will just look elsewhere for much better options.
Boxfish,
Every day I’m flabbergasted by the sheer breadth and depth of the ingenuity on display in crypto. It’s like humanity has been waiting for the right technology to finally sweep these rent-seeking mofos out to pasture
The real moment when the empire tries to strike back us when they allow gold to finally have its head and run free hoping that since they own most of it they will then still have the capital to compete.
But by that point it will be too late
Own both, be disciplined. Take profits, stake your winnings and get serious. This is how we beat them. If we don’t then they will allow the mania to eat us alive in this round and we’ll have to fight from the bottom again
Bad juju to publish your crypto coin wallets. With your wallet address, anyone can find out how much you currently own. Even 1 bitcoin can make you a target for criminals.
Collecting a ransom was always the sticky point of a kidnapping, but with crypto, you can pay your won ransom now. Crypto owners have been kidnapped and forced to transfer their coins to the kidnappers. The coins are then run through several mixers to launder the coins.
AND…. If yoiu have your bitcoin wallet on your computer, you have kiddie porn on your computer. Neferious characters have poisoned the blockchain by adding kiddie porn to the transaction confirmation space.
And anyone who is holding their crypto in wallets like that not secured by a hardware wallet is a moron.
Bitfoin exists on the blockchain, not in your hardware wallet. It takes 51% of the hashrate to confirm a transaction, legit or not. China has 65% of the hashrate currently. They are able to forge any transaction they want regardless of what your wallet says.
Also, with the rise in computing power, it no longer takes 500 years to inpersonate a wallet and spend coins…. now it is down to 4 years. With the quantum computers, it will take only a few seconds to impersonate a wallet and steal the coins.
William,
None of that is real. Quantum computing is a canard. The Chinese controlling the hashrate is an issue which is being rectified as more U.S. investment invests not only in the coins but in mining to protect those investments.
We’ll see a democratization of the hashing power as this continues. I’m uninterested in people regurgitating stupid claims about the technology of SHA-256 or any other encryption algorithm vis a vis quantum computing.
If you think that is a real argument the space would not be attracting the type and kind of capital that it is. Reality is different than fantasy.
Impersonating a wallet and a double spend attack against bitcoin is literally moronic. I’ve had real programmers explain this to me.
Moreover, once you look into privacy coins, multi-encryption algorithm coins, multi-level security muling and the rest of what’s out there, I can and will tell you this is absolutely not the reason to shy away from crypto.
Bitcoin may or may not be the long-term solution for cryptos. But it is today the asset leading the charge.
FYI, go to http://www.decred.org and read up on its hybrid PoW/PoS system to see how math plus incentives beats just math. There are a zillion ways to reimplement the basic idea of bitcoin into an unassailable system.
The market wants this to happen. It will happen.
Yes, this is nothing less than the anarconomy emigrating into space. The same technology that allows a single Marine to command more military force than a battalion of Napoleon’s troops has made personal/leased NGO-launched satellites, movable desktop earth stations financially possible – for BTC billionaires, for example. Fork the intermess. We won’t need it.
Transcripts would help the “time poor” like me .. and addresses other issues too,
There are many tools around that can automate this for you.
One example: https://www.captivate.fm/blog/podcast-transcription/
Bitcoin is already two generations behind the new “secure” ecoins. I put that in quotes because after 30 years in the computer biz I realize no system with external connections can be made perfectly secure. It’s an arms race. But the point is that when Bitcoin is seen as the roadmap for government intervention into your finances, it will be roadkill and a lot of that 200 trillion base will be (is) moving into XMR and ARRR.