The new shoots of the coronavirus they have caused anguish throughout the world. It’s the economy, of course. Monetary stimulus has inflated prices in financial markets and ironically, as the real economy suffers, there has been a boom and greed is through the roof. One of the great beneficiaries has been the oro. Gold hit its all-time high recently and is serving as a haven for the talkative, who don’t feel very comfortable placing their money on Wall Street in such uncertain times. Gold is the old school asset of choice.
We all know that the “Mecca of Cinema” is a nickname we give to Hollywood. And Hollywood is, in turn, a name we use to refer to the American film industry in general. Above all, to the cinema of the big studios. They are word games. It is semantics used to give a poetic meaning to things. Only an idiot would come to think that Los Angeles, California, by virtue of being the “mecca” of cinema, should prepare for the arrival of Muslims in times of pilgrimage. Should the tuna be the “sea hen” have plumage?
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I’m sorry, but these things drive me out of my mind. Especially when I have to read them all the time. How? Yes. When some bitcoiners talk about gold and Bitcoin, the “digital gold”. You don’t know whether to laugh or cry with the things that some say. In this article, we will talk about it in the style of the “Mecca” of cinema for Muslims. That is, “Gold went up, so Bitcoin will go up, because Bitcoin is ‘digital gold'”. Holy golden nightmares, give me patience! And you read this over and over again like a never ending torment. How do you explain to people that tuna does not have feathers despite being called the chicken of the sea? How do you explain that Muslims don’t go to Hollywood to pray? It is not easy, but here we are going to try.
Why isn’t Bitcoin actually “gold” and the phrase “digital gold” just a colorful metaphor? This of course could guide you in a thousand ways. You could start with the periodic table and then you could talk about the bits and electrical pulses in a circuit. But the reader knows all this. Let’s better talk about the correlation between the two markets. That is to say, Bitcoin, gold, and correlations? Are they alligators from the same well or are they completely different animals?
First, we must say that correlation is not causality. The accelerator is not the same as the speedometer. The accelerator is the cause of the acceleration of the car. And the speedometer even though it goes up and down at the rate of acceleration is not the cause of the acceleration. There is only one correlation. It is essential to understand the difference.
Now, the positive correlation is “symmetric” and the negative correlation is “asymmetric”. In other words, the positives move in the same direction. And the negatives move in the opposite direction. The uncorrelated ones are simply unrelated. Ok, correlation, but not by the law of cause and effect that could operate between the two. The correlation occurs due to similar behavior in a common eternal. For example, if there are many animals (herbivores) near the river, lions, crocodiles, and hyenas may arrive. The lions do not arrive because the hyenas arrived. In other words, there is no causality, but there is a correlation.
Keep reading: Bitcoin is a hedge against Elon Musk’s asteroid gold mining, say the Winklevoss twins
The price of gold, now and forever, depends, of course, on supply and demand. The offer is the supply. Mining, sales, etc. Demand are the buyers. Who buys gold? Gold is a commodity. Jewelers buy gold and industry buys gold. But gold at the same time is a speculative asset. A vulgar safeguard of value. Here we have individual investors. They typically buy gold as a hedge because of the negative correlation of gold to the overall economy.
Why is gold negative? The gold beetles say that gold is an alternative to inflation and blablabla. Fear, uncertainty, etc. He government this and the government that. This is true, but it is not the whole story. Here is a secret. What really happens? The main buyers of gold are governments. ANDhe gold is an international reserve. Which implies that when gold rises, the value of the countries’ international reserves increases. Guess what? Now the reversals are in the clouds. Uncle Sam, for example, with his “weak dollar”, and with that face of I was not, has 8,134 tons of gold. During crises, governments save their gold and continue to accumulate whenever possible.
Why do governments hoard gold? During a crisis, the currency normally becomes very strong (thanks to deflation) and money must be printed to weaken it. In this way, the growth of the economy is stimulated. But this “weakening” distorts the bond market. Governments must demonstrate solvency to their creditors. So, they do it with gold. Gold is considered safe because of its international reserve status. Volatility is avoided so as not to distort the bond market since this is the star collateral of governments internationally. Ready. Secret revealed.
Let’s analyze this gem for a minute. “Some Investors Say Bitcoin Price May Hit $ 50,000 Thanks to Warren Buffett’s Gold Purchase”. The genius behind this is my dear friend Max Keizer. Warren Buffett recently invested in a major mining company. Uncle Buffett bought 20.9 million shares of Barrick Gold Group for $ 564 million. 564 blessed millions! I mean, nothing. The market capitalization of Bitcoin is 400 times that. The total capitalization of gold is $ 7.9 (one billion) trillion. True, there is something called the Buffett effect. But the Buffett effect caused the stock price of that particular company to rise a couple of points during the days of the announcement. ANDCousin Max says that because of Buffett’s purchase, gold will continue to rise and, thanks to the rise in gold, Bitcoin will reach $ 50,000 in a very short time. Reading this review I had several gray hairs and almost an ulcer.
What Max Keizer does is take a hippo and paints it with black and white stripes every time he has a television camera in front of him. It’s a zebra! Well, no. Max, it’s not a zebra. It’s a hippo. Stop delirium. You are missing a head screw. The history of digital gold is to drive anyone crazy. Radical libertarians for ideological reasons insist on comparing Bitcoin to gold. The so-called Siamese twins. But sometimes they go to extreme ridiculousness with that cowboy movie. This Max review is one such example.
Bitcoin is another animal. Bitcoin is not the government’s game with international reserves and the sovereign bond market. Bitcoin is a group of young millennials in front of a computer creating an international citizen currency, as an alternative to banks and governments, to obtain greater financial freedom and make good money along the way. Bitcoin looks more like Tesla than gold. But I better not say that Bitcoin is the “digital Tesla” because Max can sit at his computer and use it as a car.
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