Finance beats the US: Why Bitcoin is better than gold

Source: Liu Jiaolian

The Fed suddenly turned hawkish, and the market that was looking forward to the interest rate cut suffered a 10,000-point critical hit. There were even rumors that the Fed might even suddenly raise interest rates to 8%, hitting the world hard.

The Nikkei index, which had been touted by many financial bigwigs not long ago, also began to turn downward.

But what's more terrible is that the exchange rate of the yen against the US dollar began to fall rapidly.

Perhaps what makes many people wonder is that the Bank of Japan has rarely raised interest rates? Why is the yen weakening instead? Perhaps this logic should be reversed: It is precisely because it can't bear the pressure of exchange rate depreciation that the Bank of Japan is forced to break the convention and rarely raise interest rates.

In fact, despite the sharp rise of the Nikkei index, it has not risen much after multiplying the exchange rate depreciation. From 28,500 points to 37,300 points, the exchange rate fell from 1:133 to 1:155, and the annual increase was only 12%.

Protect assets but not exchange rates, and both assets and exchange rates will lose in the end. Do not protect assets but exchange rates, and both assets and exchange rates will be preserved in the end. Ignoring public criticism and allowing leverage to explode, scraping the bone to cure the poison, this requires superior courage - I am talking about Bitcoin.

Trying to save the market and protect asset prices, leveraged speculative capital has increased shipments, and capital flight has caused pressure on exchange rate depreciation, forcing the central bank to raise interest rates to stabilize exchange rate depreciation. The interest rate hike has led to the collapse of asset prices, and finally neither assets nor exchange rates can be preserved. The Bank of Japan seems to be facing this unsolvable dead end.

When we talk about this dead end of the Bank of Japan, the default reference system is the US dollar.

Now let's replace the Japanese stock market with the US stock market, the Bank of Japan with the Federal Reserve, the yen with the US dollar, and the US dollar with gold, and then deduce this situation.

If something happens to the US stock market, the Federal Reserve will definitely rescue the market and protect asset prices. This has been verified in the 2008 financial crisis and the 2020 epidemic circuit breaker.

If the Federal Reserve rescues the market and protects asset prices, capital can take the opportunity to increase shipments.

Here comes the important key: to promote capital flight after shipments, and put pressure on the US dollar to depreciate the exchange rate. What does it mean? Translated, the price of gold continues to rise. This is exactly what is happening now.

This will force the Federal Reserve to raise interest rates, or at least maintain high interest rates, to offset the pressure of the dollar's rapid depreciation. The Federal Reserve is talking about inflation on the surface, but the real pressure comes from the depreciation of the US dollar.

Continuing to raise interest rates (crazy) or maintaining high interest rates for a long time will inevitably lead to a banking system crisis (the collapse of Silicon Valley Bank in 2023 has already reminded us), as well as the collapse of assets such as US stocks.

Once there are signs of asset collapse, it will immediately trigger the Federal Reserve to rescue the market and protect asset prices, thus returning to the beginning of this game and starting an endless cycle. This endless cycle has become a "perpetual motion machine" that drives the depreciation of the US dollar and the rise of gold - until the Federal Reserve pushes the entire United States into a situation of no return, and finally collapses completely, and the "perpetual motion machine" is completely shut down.

The above is well verified. You can see it clearly by pulling out the trend chart of US stocks and gold since the 2008 financial crisis.

The above picture is the "15-year bull" of the S&P 500. As magical as the Federal Reserve is, it has really achieved the "ironing cycle" that economists dream of. The rescue operation is so smooth that the U.S. stock market has not had a clear bull-bear cycle for 15 years. Has the Federal Reserve really defeated the economic law?

At the same time, gold also began to "break the seal" and re-emerge.

The real American elite class is as clear as a mirror: to maintain the status of the dollar, it must never relax the suppression of gold. From Roosevelt's Decree No. 6102 in 1933 to the Dodd-Frank Act in 2011, the United States has never relaxed its suppression of gold. As the country with the largest gold reserves, the United States has the largest chips to short gold and suppress the gold market.

Some people have penetrated this life gate of the United States. The financial war against the United States is to grasp the "important key" above, continue to buy gold, raise the gold exchange rate, promote capital flight, and promote the depreciation of the US dollar.

This is exactly the strategy of "shooting the bull from behind the mountain".

In 2008, a man also understood this "shooting the bull from behind the mountain" situation. At the same time, he felt that gold was too easy to be controlled by the United States, so he wanted to make a better gold, distribute the chips from the beginning, and eliminate the ability of the United States to control the chips and short-sell. So this person invented something similar to electronic gold, which he called "Bitcoin". This person gave himself a pseudonym, called "Satoshi Nakamoto".

A very different thing about Bitcoin and gold is that its control does not rely on violence (armed force) but only requires mathematics (cryptography). Violence is very easy to be monopolized by the state, and in fact it is monopolized. Mathematics cannot be monopolized by the state. In this way, gold can easily be centrally controlled by the state, because individuals cannot have enough weapons to compete with national power, and thus cannot fundamentally ensure their ownership of gold. Bitcoin is different. Personal power is equal to national power. Your private key cannot be forcibly deprived even if it is as powerful as the United States.

In this way, the decentralization of Bitcoin ownership will deconstruct the monopoly nature of the state. It makes sense to talk about the United States as a whole concept controlling a large amount of gold, but it is meaningless to talk about the United States as a whole concept controlling a large amount of Bitcoin, because Bitcoin deconstructs the concept of the United States as a whole. American investors who hold gold are first Americans, and then gold holders. Michael Saylor, the boss of MicroStrategy who holds Bitcoin, is first a Bitcoin holder, and then an American.

Bitcoin is internationalist (Internationale). Bitcoin private key holders are true internationalists.

It may take 50 or even 100 years for everyone in the world to fully and thoroughly understand this.

The Art of War says: "If I want to fight, even if the enemy has high walls and deep trenches, I will have to fight with him. I will attack what he must save."

Pushing up gold and Bitcoin is like launching a hypersonic precision-guided missile to directly hit the lifeblood of American finance - the US dollar.

However, the current volume of Bitcoin (1.3 trillion dollars) is too small compared to gold (16 trillion dollars), about one-tenth of the latter, and can only serve as a wing assist.

For every 1% increase in gold, its attack power will be equivalent to a 10% increase in Bitcoin. A 10% increase in gold is equivalent to a 100% increase in Bitcoin.

From October last year to now (April 2024), gold has risen by 30% from $1820 to $2370. During the same period, Bitcoin has risen by 160% from about 25k to 65k today.

Ten times 30% is 300%. 160% is only half of 300%, and the other half, about 150%, is still owed. If 65k rises by another 150%, it will be 90,000-100,000 dollars.

If gold stops at $2,400 and Bitcoin continues to rise to 100,000 dollars, then the results of the wing assist will be no less than the frontal attack.

Gold attacks the dollar head-on, and if Bitcoin assists from the side and the effect is not inferior to the main attack, then the damage to the dollar will be doubled.

So the Fed is in a dilemma: it is forced to bite the bullet and continue to raise interest rates or even raise interest rates in order to save the dollar from its decline.

Unfortunately, this time, the Fed sang hawkishly, the U.S. stock market collapsed, but gold and Bitcoin did not follow the U.S. stock market at all, but one was around $2400 and the other was around 65k, sitting on the Diaoyutai, crossing their legs, eating peanuts, drinking beer, waiting to see the Fed's good show.