The whole truth about GOLD and BITCOIN with an excursion into the history of the financial system.
In current market realities, these two assets are called defensive assets.
If Gold is a conservative asset, then Bitcoin is an aggressive one.
This is the proportion in which you can allocate it in your portfolio. My recommendation – you can allocate up to 20% of your capital to cryptocurrencies. In current realities, it may even be up to 30%.
Let”s first look at GOLD – as the main protective asset of mankind. In 1971, U.S. President RICHARD NIXON unpegged the dollar exchange rate from GOLD.
After that, an era of prosperity and prosperity began in the U.S. – and America reached the peak of its greatness by the 1990s, especially against the background of the collapse of the USSR. Because it was possible to print money without limits.
But, the endless printing of money is like a drug you get hooked on and can”t get off. Any problems are solved by turning on the printing press. Convenient. Inflation is exported to the outside world (everyone is lining up to the U.S. for the dollar).
Gold, meanwhile, has gone nowhere – it has, for hundreds of years, been a major defensive asset at all times. But if everyone keeps buying gold and believing in GOLD – then the status of the DOLLAR will be undermined. Therefore, with the help of the DOLLAR, the Western financial elites have also seized the opportunity to DEFINITELY BECOME THE COURSE OF GOLD. That is, in essence, to DECIDE how much GOLD WOULD BE. And naturally, if you print DOLLAR, it is not to your advantage that the value of gold ROSS.
By 1985, thanks to efforts, it was possible to stabilize the exchange rate of GOLD – $320-350. And the whole thing lasted until about the 2000s. By that time, money was being printed, no one threatened the dominance of the United States and the Fed – everything was under control and people did not think about buying GOLD (because you can take American bonds and stocks – bought with the U.S. dollar). And since 2003, despite attempts to lower the value of gold, thanks to the DOTCOOM crisis (the IT bubble burst) – and the strengthening of Russia and China – people began to think about protecting their capital not only in the stock market and all the money flowed into other areas (real estate, gold). As a result, from 2003 to 2011, GOLD grew from $350 to $1, 750 – i.e. 5 times over 8 years!
Why? Because we printed a lot of money – the 2008 crisis happened, which once again showed the vulnerability of the Western financial system. Investors began to realize that it was better to sit in the GOLD than to lose in the markets. And since 2010, the Fed and the rest of the Western world began the biggest monetary pumping of money (in simple language – printing as much money as they wanted and could) – and they did their best to stifle GOLD in growth again (otherwise it would be dangerous for stock markets) – money was flowing into markets, indices were renewing their highs – everything seemed fine.
BUT – there is real economics that says – there are limited goods and services in the world, but there is UNLIMITED money being printed. What happens when money is unlimited – but products are limited? You get INFLATION!
In the beginning it was mostly in countries NOT in the WEST (there is a mechanism for exporting inflation through the dollar) – but in the Pandemic, THIRTY of the world”s dollars were printed! In 2 years, the printing press went so far that it never stopped for a second.
Nothing good could come of this – inflation began to creep in everywhere.
And the Fed began to fight inflation – it was now the main enemy that was driving down the standard of living in Western countries. The most effective way to stop inflation is to raise the central bank rate. In the U.S. it is 0-0.25%. That is, the money is borrowed almost without interest, and that is how all Western business exists (the debts are covered by new debts). That is, the West borrowed to cover a debt, which was borrowed to cover another debt. And so on ad infinitum! The rates were almost zero – that is, money was readily available. There was plenty of money – and it ran up inflation – and to stop it you have to raise the rate – which the Fed has started talking about in the last six months. So the rate goes up – you have to pay old debts at NEW higher interest rates and many businesses can”t afford that.