Our thoughts on Gold vs. Bitcoin

We picked a hell of a week to head to Cayman as MENA lit up…again. With headlines dominated by Israel we took a look at our themes dominated by long chaos and inflation and feel comfortable headed into what should be a contentious election year. Since gold was top of mind all week, we kept replaying a note that Doug Casey touched on last week during our Happy Hour; that of BTC being the on-ramp to gold.

BTC has converted a new generation of reddit-loving, anti-fiat crusaders to the markets. Once baptized, it’s a sticky mindset and one that use to lead to all things gold. Nowadays, there is a full suite of coins and sh*tcoins like Doge Gay Son and CumRocket, all battling for that incremental dollar, and sucking the funds out of the pet rock. But what happens when crypto momo flips and selling begets selling? Products with no intrinsic have no CF to fall back onto and are simply perception-driven ponzis. Do these new converts simply lose their new anti-fiat religion??

Look, we’ve been in the markets for over 20 years and seen a ton of cycles and read a ton of history. Themes come and go, and monetary regimes may change. But the stickiest narrative I have ever seen is the anti-fiat, inflation, collapse of the USD, fiscal deficit and de-dollarization themes. Not saying these things won’t happen won’t happen (hint: it will..eventually) but the point is that the same arguments have been around for decades. And once converted to the mindset, you are a lifer. Forget the trading sardine for a minute…the point is, BTC pulled forward a TON of new demand into this religious mindset and at an earlier age then past cycles (see meme above).

Since we are all about fund flows here at KEDM let’s go back to the initial question – what happens when crypto momo flips? Will the newly religious begin losing money in their cults and shake their anti-fiat mindset? Or simply maintain their religion and turn to another sect that’s been around since 1500BC? The BTC to gold chart below looks pretty “toppy” and can speak to fund flows:

And when push comes to shove and chaos and inflation ramp, will the plebs turn to a newly formed coin to hedge their risk? Or, again, turn to the thousand year old O.G.? If this past week is any indication, the plebs have spoken -both in the paper markets and physical (see China chart below)

If the charts above hold, we are looking at fund flows flipping to the shiny pet rock. As KEDM’er know we have traded BTC a few times in the past as it was our “go-to” liquidity trade. But more and more, it looks as if gold may capture the hearts and minds of the newly converted anti-fiat and chaos religious. If so, that’s a heck of a lot of fund flows…