The new coronavirus outbreaks have caused fear around the world. It is of course the economy. Money incentives have raised prices in financial markets and ironically, while the real economy is suffering, there has been a boom and greed is going through the roof. One of the big beneficiaries was gold. Gold has hit its all-time high lately and serves as a haven for interlocutors who, in such uncertain times, are uncomfortable placing their money on Wall Street. Gold is the old school good.
We all know that the “Mecca of Cinema” is a nickname we give to Hollywood. And Hollywood, again, is a name by which we refer to the American film industry in general. Especially in the big studios. They are word games. It is a semantic that is used to give poetic meaning to things. Only an idiot would think that Los Angeles, California, the “Mecca” of cinema, should prepare for the arrival of Muslims in times of pilgrimage. Should tuna be the “tendon” that has plumage?
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Sorry, but these things drive me away. Especially when I have to read them all the time. How? Yes. When some bitcoiners talk about gold and bitcoin, they talk about “digital gold”. They don’t know whether to laugh or cry with the things some say. In this article we will talk about it in the style of the “Mecca” of cinema for Muslims. This is, “Gold has gone 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 endless agony. How do you explain to people that tuna has no feathers even though it is 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 will try.
Why is Bitcoin actually not “gold” and the expression “digital gold” just a colorful metaphor? This could lead you in a thousand ways, of course. You could start with the periodic table and then talk about the bits and electrical pulses in a circuit. But the reader knows all of this. Let’s talk better about the correlation between the two markets. This means, Bitcoin, Gold and Correlations? Are they alligators from the same well or are they completely different animals?
First of all, we have to say that correlation is not causality. The accelerator pedal is not the same as the speedometer. The accelerator pedal is what causes the car to accelerate. And the speedometer is not the cause of the acceleration, although it goes up and down at the rate of acceleration. There is only one correlation. It is important to understand the difference.
Now the positive correlation is “symmetrical” and the negative correlation is “asymmetrical”. In other words, the positives are moving in the same direction. And the negatives are moving in the opposite direction. The uncorrelated ones are simply not related. Ok, correlation, but not by the law of cause and effect that could work 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 can all arrive. The lions are not arriving because the hyenas have arrived. In other words, there is no causality, but there is a correlation.
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The price of gold now and forever depends of course on supply and demand. The offer is delivery. Mining, sales, etc. Demand are buyers. Who is buying gold? Gold is a commodity. Jewelers buy gold and industry buys gold. At the same time, however, gold is a speculative asset. A vulgar value guarantee. Here we have individual investors. You usually buy gold as a hedge because gold has a negative correlation with the overall economy.
Why is gold negative? The gold beetles say gold is an alternative to inflation and blah blah blah blah blah blah blah blah blah blah blah blah ”th Fear, insecurity, etc. The government this and the government that. That’s true, but it’s not the full story. Here’s a secret. What is really happening? The main buyers of gold are governments. ANDThe gold is an international reserve. This means that as the gold value increases, the countries’ international reserves increase. Guess what? Now the reversals are in the clouds. Uncle Sam, for example, with his “weak dollar” and that face of mine doesn’t have 8,134 tons of gold. During crises, governments save their gold and continue to accumulate where possible.
Why do governments hoard gold? During a crisis, the currency usually becomes very strong (thanks to deflation) and money has to be printed to weaken it. In this way, economic growth is stimulated. However, this “slowdown” distorts the bond market. Governments have to prove their creditors are solvent. So they do it with gold. Gold is considered safe due to its international reserve status. Volatility is avoided so as not to distort the bond market as it is the most important security for governments at international level. Ready. Secret revealed.
Let’s analyze this gem for a minute. “”Some investors say Bitcoin price could hit $ 50,000 thanks to Warren Buffett’s gold purchase”. The genius behind it is my dear friend Max Keizer. Warren Buffett recently invested in a large mining company. Uncle Buffett bought 20.9 million shares in the Barrick Gold Group for $ 564 million. 564 blessed millions! I don’t mean anything. Bitcoin’s market capitalization is 400 times. The total capitalization of gold is $ 7.9 (one billion) trillion US dollars. True, there is such a thing as the Buffett Effect. However, the Buffett Effect caused each company’s share price to soar a few points in the days of the announcement. ANDCousin Max says that because of this Buffett purchase, gold will continue to rise and thanks to the rise in gold, Bitcoin will reach $ 50,000 in a very short time. When I read this review, I had multiple gray hairs and almost an ulcer.
What Max Keizer does is take a hippopotamus and paint 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 hippopotamus. Stop the delirium. You are missing a cap screw. The story of digital gold is supposed to drive everyone crazy. Radical libertarians insist on comparing Bitcoin to gold for ideological reasons. The so-called Siamese twins. But sometimes they get extremely ridiculous with this cowboy movie. This max rating is one such example.
Bitcoin is a different beast. Bitcoin is not the government’s game with international reserves and the government bond market. Bitcoin is a group of young millennials in front of a computer who are creating an international citizen currency as an alternative to banks and governments in order to gain more financial freedom and earn good money in the process. 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.