Bitcoin, gold hit record highs: Fed smells crisis

The moon is cold, the river is clear and the night is dark; a beautiful woman’s smile is worth a thousand pieces of gold.

On March 8, Women’s Day, Bitcoin BTC was full of sincerity. At UTC+8 23:00, the highest price reached 70,000 US dollars!

After a brief pullback to 66k, it pulled back and continued to climb.

At this moment, there seems to be only one direction left, and that is up!

In the March 7th Teaching Chain Internal Reference "How to Outperform BTC Without Risk", the macro overview section cited a chart of the gold box breakthrough. Update: Gold has reached $2,200 on Friday, setting a new record high.

Zoom out. This historic box breakthrough not only breaks through the 2023 box, but also the 4-year box built since 2020.

A breakthrough of this level is by no means easy!

Since the collapse of the Bretton Woods system in 1971 and the decoupling of the dollar from gold, gold has soared from $35 to $2,200.

On the other hand, the depreciation of the U.S. dollar relative to gold is as high as (35-2200)/2200 = -98.4%! This was achieved even though the United States, the world's top hegemon, had been suppressing gold for a century!

Readers who are not familiar with the story of gold may wish to review the article "Gold, Gold" published by Jiaolian on September 28, 2023.

BTC is also following closely behind gold and on the road to breaking through the 4-year box. As shown in the following figure:

The strangest thing was that everything was silent. Everything seemed calm. But the calmer it was, the more creepy it made people feel.

There is no particular positive or negative macroeconomic background, but the price seems to be out of the macro guidance and just keeps rising.

Rising for no reason.

It is as if God threw man into a corner of the earth, and he would find everything he could eat and eat it, and then continue to grow and reproduce.

That powerful and vigorous inner vitality!

The teaching chain often says that all indicators are lagging indicators of prices.

Conversely, price is a far leading indicator.

I can't help but think of Eric Hughes's wonderful description of information in "The Cypherpunk Manifesto": "Information is Rumor's younger, stronger cousin; Information is fleeter of foot, has more eyes, knows more, and understands less than Rumor." (For the full text, see Liu Jiaolian's article "The Cultural Type of Bitcoin and Its Historical Position" on September 29, 2019)

Price is a kind of information. It can even spread faster than rumors. Rumors are often so far ahead of facts and truth that there are many jokes on the Internet that rumor is an abbreviation for "far ahead prediction".

As early as March 2, in the internal reference of Jiaolian, "Surprise! Gold and counterfeit stocks soar together! What's the mystery?", Jiaolian used four words to describe the feeling of this rise that was out of touch with the macro and without cause: "undercurrents surge."

On the 8th, the internal reference of the teaching chain "Dollar down, gold up, and big cake sideways" wrote that Federal Reserve Chairman Powell said at a Senate hearing on Thursday, "We are not far from having the confidence to cut interest rates." The Federal Reserve's 2024 FOMC committee voting member and Cleveland Fed President Mester said that the Federal Reserve should be able to cut interest rates later this year.

Of course, they still added that disclaimer: if more data shows that the easing of inflation is sustainable.

In any case, this is the beginning of the Federal Reserve's call for interest rate cuts.

In the Jiaolian internal reference "Internal and External Factors for the Continued Pressure on the Crypto Market" on January 23, Jiaolian said that in the Silicon Valley Bank bankruptcy incident in 2023, the BTFP assistance tool urgently launched by the Federal Reserve to rescue the market will expire in March.

A subtle moment.

On the one hand, the Federal Reserve firmly expressed its confidence that the BTFP did not need to be renewed, but on the other hand, it began to push for interest rate cuts.

The Federal Reserve should be able to see more clearly than most people in the world how critical the situation is beneath the calm sea.

But I don’t want to mystify the Federal Reserve’s superpowers and say that the Federal Reserve can see things that ordinary people can’t see at all.

The Federal Reserve is nothing more than a bureaucracy.

Since it is a bureaucratic organization, it is more like a machine, a tool.

The more diligently it performs its duties, the more it loses its complex human reactions and degenerates into the conditioned reflexes of a paramecium.

Just like the guys at the FOMC interest rate meeting keep an eye on inflation and employment indicators to make decisions all day long.

Individual investors are more human than institutions. Therefore, they tend to mystify the "simplicity" of institutions. As the following interesting story shows:

There is a curved road at the foot of a mountain. Not long ago, a serious car accident occurred there, killing two people. There happened to be a tall lamp post at the location of the accident.

One day, Xiao Wei's mother drove Xiao Wei past a bend in the road. The road was empty except for the white clouds.

Just as the car approached the lamppost where the accident occurred, Xiao Wei, who was sitting in the back seat and looking out, suddenly shouted: Mom, Mom, there are two people up there!

Xiao Wei’s mother suddenly remembered the car accident not long ago, and recalled the folk rumors that children can see things that ordinary people can’t see. She couldn’t help but feel horrified, and quickly stopped Xiao Wei: Don’t talk nonsense, there is no such person!

I think everyone knows the ending:

After returning home, Xiao Wei’s mother became more and more frightened the more she thought about it, so she told Xiao Wei’s father what had happened.

Xiaowei's father drove Xiaowei's mother and Xiaowei to the bend again and got out of the car to check the situation.

Xiaowei’s father asked Xiaowei, where are the two people you mentioned?

Xiao Wei pointed towards the distant hillside and said: Those two people are right up there!

Xiao Wei's father and mother looked in the direction Xiao Wei pointed and found several large signs erected halfway up the mountain with eight big words written on them: Forest fire prevention is everyone's responsibility!

That's the end of the story.

When we heard Xiao Wei say that there were two people up there, we thought of the dead in the car accident and saw forest fire prevention, which are two completely different worldviews.

How we understand the world determines how we transform it. To put it another way, it at least determines how we react and seek benefits and avoid harm.

If the worldview is wrong, the understanding will be biased, and the actions will be wrong. The action of seeking benefit will lead to harm. The action of avoiding harm will avoid benefit.

Investing is the top level profit-seeking and risk-avoiding behavior.

It is difficult for an investor to form a correct world view if he only gets information from the media and self-media.

Media and self-media are traffic businesses. The essence of traffic business is to cater to the public's emotions.

Looking at the fact that after the A-share market broke through 3,000 points before and after the Chinese New Year, the emotional output of most media and self-media was mostly pessimistic, we can see that their existence is just to cater to public sentiment and thus gather traffic.

Investing means being the enemy of the public.

Excitedly look for opportunities when the public is pessimistic, and quietly take profits and exit when the public is optimistic.

Outputs that cater to public sentiment are of no value for investment.

If you haven’t seen through this level yet, it means that you still need to continue practicing on the road to becoming a qualified investor.

A qualified investor must be able to distinguish clearly from the complex information which ones are talking about "death in car accidents" and which ones are talking about "forest fire prevention".

If you cannot distinguish clearly, you will inevitably be misled and go astray.

Between August and September 2023, Jiao Lian wrote a macro trilogy: "Artificial Prosperity: The Great Transfer of Wealth" (2023.8.21), "Shooting the Bull from Across the Mountain: The Great Financial Collapse" (2023.9.19), and "Swordsmanship on Mount Huashan: The Final Showdown" (2023.9.22).

Write down what I have seen in the teaching chain: In today's world, two masters are competing in internal strength from a distance, and they are in a stalemate and neither of them will give in.

One side wants to knock down the other side across the mountain. The other side also wants to knock down the one side across the mountain. So the two sides work together to push the mountain higher.

Just like squeezing a balloon with both hands, the balloon becomes a disk and its diameter is enlarged.

Another example is the movement of the earth's crust. When two continental plates collide and squeeze, they squeeze out high mountains on the surface.

This mountain is gold and electronic gold - Bitcoin.

Just as Jiaolian said at the end of the article "Shooting the Bull Across the Mountain" on September 19, 2023: "Every gold buyer, every patient gold hoarder, is a strategic ally and united front in the fight against the bull across the mountain."

“And all those who participated in this united front will benefit from the failure of the Federal Reserve and the collapse of U.S. finance through the sharp rise in the value of their assets.”

On September 19, 2023, BTC was 27,000 US dollars and gold was more than 1,900 US dollars.

Today, March 9, 2024, BTC is 68,000 US dollars and gold is nearly 2,200 US dollars.

The first half of the sentence, “asset prices have risen sharply”, has already come true. We will have to wait and see the second half, “the Fed has failed”.

We all know that technically, the US financial system will not collapse and the Federal Reserve will not fail because it has the superpower to print unlimited money.

Even a super black swan like the one in March 2020 can be resurrected by the Federal Reserve's emergency unlimited QE.

However, everyone has a scale in their heart.

Everyone knows how the Federal Reserve will surrender and raise the white flag.

Once the Federal Reserve smells the precursor to a financial collapse crisis, it will open the floodgates and launch a massive rescue effort, thus declaring the Federal Reserve's failure.

The dollar circulates, the liquidity tide rises and falls, interest rate cuts and liquidity releases to push up asset bubbles to make profits, interest rate hikes and liquidity withdrawals burst bubbles, and then interest rate cuts and liquidity releases to harvest broken assets at low prices, pushing up asset bubbles and selling them at high prices, and the cycle repeats, and it works every time. Readers who don’t understand can read the article "The Vampire Attack of the Dollar" on September 4, 2023 in Jiaolian.

But in the 2007-2008 round, the US dollar failed. The interest rate hikes and liquidity tightening caused its own subprime mortgages to explode.

If the Federal Reserve hesitated for a moment, the financial tsunami would sweep the world.

The Federal Reserve quickly surrendered, ushering in an era of quantitative easing.

Satoshi Nakamoto, the god who came from heaven, happened to invent Bitcoin in 2007-2008 when he had a burst of inspiration.

Bitcoin provides the world with a tool to "exit" the dollar game.

At that moment, the East cooperated with the West.

Return the dollars to the United States in exchange for a handful of U.S. debts.

Wealth goes west, debt goes east.

4 trillion, after all, it was the hardworking nation across the ocean who silently borne it all and saved Wall Street, which had messed up everything.

At this moment, the East no longer cooperates with the West.

I have been sharpening my sword for ten years, but I have never tried it. Today I will show it to you. Who has any grievances?

Throw U.S. debt into the Pacific Ocean and lend dollars to poor countries.

To borrow a classic line from Let the Bullets Fly:

Brothers: Big brother, who is the poor country?

Zhang Mazi: Whoever is poor is a poor country.

Mr. Huang: It is a sin to distribute the green dollars to poor countries!

This time, Mr. Huang's interest rate hike and monetary tightening did not hit the poor countries whose bubbles had collapsed, because Zhang Mazi lent them the US dollars he had accumulated over the past decade.

Zhang Mazi would lend out as much water as Mr. Huang pumped out.

Wherever there is a shortage of water (US dollar liquidity), we will make it rain (lending).

Mr. Huang's water pump has been running for two years, but it has not killed any poor people. Instead, he himself can no longer bear it.

After all, among all the patients in the world who are thirsty for dollar liquidity, the one who is the most seriously ill and terminally ill is Mr. Huang himself!

The United States itself is the one that owes the most debt. (See Liu Jiaolian's article on October 10, 2023, "War between Palestine and Israel, the Federal Reserve Surrenders")

As analyzed by Jiaolian in the article "A Small-Scale Preview of the Collapse of the Double Helix System of the US Dollar and US Debt" on November 17, 2023:

“When the scale of U.S. debt was relatively small, the dollar-U.S. debt double helix operated relatively stably by extracting water and plundering value through both internal and external pipelines.

"However, as the size of U.S. debt has rapidly expanded to more than $33 trillion, high interest rates have become an unbearable burden.

"The huge debt scale and interest payment pressure, coupled with the fact that the country not only cannot pump money into the economy but also has to use helicopter money to win votes, and that it is also facing a tough challenge to harvest value from the US military, the double helix is ​​somewhat unsustainable.

“Thus, the once ingenious MMT (Modern Monetary Theory) and dollar tide is now in danger of slowing down and reversing into a death spiral.”

The world has quietly changed its face.

The US dollar is also divided into the U.S. dollar and offshore dollar.

Mr. Huang has the final say on the American dollar.

When it comes to offshore dollars, Zhang Mazi has the final say.

Didn’t you see that last year, Mr. Huang wanted to start a currency exchange rate war, but was directly suppressed by Zhang Mazi. (Refer to Liu Jiaolian’s article “Beat the Short Sellers” on September 12, 2023)

From the announcement by the central bank in September last year to today, March 2024, six months have passed, and CNH has kept a close eye on USD. No matter how the US dollar index fluctuates, USD/CNH is fixed at 7.2 and remains unchanged.

Hold on to the green mountains and never let go, roots are planted in the broken rocks. No matter how many times you are beaten, you will still be strong, no matter which direction the wind blows.

From the moment the two peerless masters were determined to meet on Mount Huashan to decide who would be the winner, the situation was set, and the surge in gold and electronic gold BTC became inevitable.

"There is a legend of "Nuwa mending the sky" in mythology. Silently dumping US debt, hoarding US dollars, and engaging in counter-cyclical regulation, I ease when the US tightens, and I fill the hole when the US dollar leaves, turning the violent deleveraging of the US dollar (around the world) into gentle, elegant and harmonious deleveraging, which is comparable to Nuwa mending the sky in the new era." (Quoted from Liu Jiaolian's article "The US Dollar Seeks Benevolence and Gets Benevolence" on October 26, 2023)

At this moment, the dollar is getting what it wants.