Bitcoin Going Up Will not Keep Gold and Silver Down

Bitcoin is making ever higher highs despite being as useless as ever. There's nothing Bitcoin can be used for outside of speculation. It cannot even compete with SWIFT for international transactions. The volatility is simply too great. Even a short term contract like a transaction involves significant currency risk when done in Bitcoin, and long term contracts are impossible. No-one knows what the price may be tomorrow, let alone a year from now.

None of this is true for gold and silver because gold and silver have physical properties that put them into the general hierarchy of things. There's a limit to how high or low the price of gold and silver can go relative to other commodities such as eggs and milk. Gold and silver cannot for this reason go to the moon. But they cannot go to zero either. This is not the case for Bitcoin which can have any price from zero to infinity, depending on the general mood of the speculators involved.

What is lost on the speculator during times of euphoria is the down side risk of speculative positions. Given the real world limitations on gold and silver, Bitcoin comes across as superior precisely because it is untethered by real world constraints. It's only when prices go down that speculators realize that an anchor in reality would be a good thing. But speculators are currently blind to the fact that Bitcoin can go to zero. They are flocking to it.

Spurred on by people like Musk, who would hate to see the price of silver take off in a big way, speculators go for Bitcoin rather than real world alternatives. Musk has even secured a big stake in Bitcoin for himself to illustrate that he's serious about his commitment. He's creating for his followers an illusion of solidity, ushering them into the unreal world of crypto, thereby avoiding a run on silver. Or so he thinks. But Musk is forgetting something important about money. Whenever someone buys something like Bitcoin, someone else is selling, and that someone else is unlikely to sit on cash for long before buying something else.

Cash circulates from one investment to another. It's never "put into" anything. Cash is always on the side-line, moving from one hand to another. What happens next in the alternative currency space is therefore wholly dependent on what Bitcoin sellers do with the cash received from people like Musk.

Many of those selling into the current speculative run on Bitcoin are sceptical to cash. They understand the inherent perils of fiat money systems. That's what attracted these people to Bitcoin in the first place. They wanted to escape central bank lunacy. With central bankers going full retard everywhere, they are not going to sit on their cash for long. Once they get their mansions and yachts, they will buy gold and silver.

Musk may have delayed the run on silver for now, but this is far from over. Rampant money printing by central bankers everywhere will send prices of all things higher. The liquidity is like a tsunami. It lifts all boats. Some are lifted before others, but every boat will eventually be pushed up. There's no way of avoiding this except through liquidity withdrawal from central banks. But it's too late for that now.

We're heading for widespread destruction of the monetary system. When that happens, speculative sentiments will flip from greed to fear. Bitcoin will go to zero together with Tesla shares and other speculative assets. Only that which is anchored in reality will be left standing. Everything else will be swept away by the tsunami.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link