The day after my previous post the market had a 2% drop due to the escalation I had pointed out, but then Trump walked back his Greenland threats by announcing there was a "framework" in place between the US and Europe to have joint co-operation in Greenland to allow for increased military presence and perhaps other things like resource extraction. As the result, the market recouped all the losses in short time.
We've seen a parabolic run and now sharp correction in Gold and its more speculative sibling Silver. I've been meaning to discuss Gold for while. This run in Gold has been underpinned by 3 forces. The first one started 4 years ago after the US weaponized the US dollar by freezing Russian US dollar reserves. As a response to this weaponizing, central banks around the world ramped up their Gold reserve purchases. The next force has been the decline in the US dollar which is arguably mainly due to concerns about excessive deficit spending. The 3rd driving force has been Trump's obnoxious actions which as created, to use one of his favorite words, "tremendous" uncertainty and disdain of the US from foreigners. Gold took a dive Friday shortly after it was revealed that Kevin Warsh was chosen by Trump to be the new Fed Head. Since Warsh is considered a monetary "hawk" by Wallsttreet, that would imply less chance of rate cuts which supposedly is supportive for the US dollar and hence weakens the 2nd driving force that has been driving gold higher. This is quite a weak excuse for a correction. First of all, this idea that the level of the interest rate is a primary driver of a currency's value is simply false. Most of the weakest preforming currencies over the past several years have the highest interest rates. Secondly, Warsh has indicated he is actually receptive to the idea of lowering interest recently because of lower inflation pressures, but since he has this reputation of being hawk, people seem to be more focused on that. It doesn't take much of an excuse to trigger a correction when something has been running red hot like Gold has...I just have serious doubts that the trigger - the nomination of Warsh - is going to end up being the reason that the gold bull market or bubble has ended. By the way, why isn't anyone calling this Gold run a bubble? The parabolic nature of its rise suggest it is one. Regardless, I have my doubts this Warsh sell-off is going to end up marking the end of this gold run just yet unless we see other things happen in the near future that truly weaken 1 or more of the 3 mentioned driving forces of Gold.
Now onto crypto. I'll be quick to admit that I severely underestimated the length and heights of the BTC run. I have been on record to state that BTC and all other crypto are simply being underpinned by greater fool buying. BTC, having been the OG of crypto has been able to recruit the greatest amount of greater fools, far more that I thought possible. What is BTC actually useful for aside for criminal activity? Fuck all. I'm sure someone can create a crypto coin superior to BTC when it comes to things like power consumption, costs, scalability, ect. just how how the first computer or any other tech product was never the best one. But even creating a better version of BTC doesn't make it worth anything unless you can convince the masses that it does just like BTC did when if first came out, just like the meme stocks did in 2021. It's essentially the same as a religious belief. Ultimately though reality prevails. In the case of BTC, it had the same reasons to go parabolic just like Gold did but it didn't. Why? It's probably because it may have finally ran out of greater fools whereas with Gold, it did not attract the greater fool crowd until just recently. Gold was actually money, not just in ancient times, but in recent times going back to 1970s when the US dollar was backed/convertible to gold. So, if there's going to a be true crisis in confidence in paper money, i..e the US dollar, Gold is likely to be the winner, because it's been used as a currency before and the reason for that was because it has a tangible aspect to it that everyone around the world recognizes and uses. Gold would not be the only winner, other commodities, and tangle assets like land, real estate, food would appreciate notably. You could argue that in really dire economic collapse scenario it would be only the essential commodities that hold value the best. How much do you think your BTC would be worth in that scenario? Less than nothing.
Anyhow, I could once again be under-estimating the persistence and pool of the greater fool buyers of BTC and this ends up being just another temporary downturn but I gotta tell you ,the action in BTC is not a good look here given what should be a bullish environment for it. There's no shortage of buy the dip crypto bros on twitter. but you need NEW greater fools to keep the party going longer term not just circle jerking. We'll see what happens...
