Behavioral economics at work; Bitcoin was established to be a substitute for gold

The manipulation of gold (blue candles, left axis) and the vital role bitcoin (red and green candles, right axis) serves the central banks; Since the implementation of the COVID monetary and fiscal policy programmes, the price of gold has acted in a counterintuitive manner, while btc took off

Consumables Substitution Effect – As the price of a good increases, the demand for its substitute rises

In classical microeconomics, as the price of a consumable good increases, the demand for its competing substitute rises.

The substitute effect under everyday circumstances is straightforward and makes perfect sense. When we have the choice of consuming a number of goods; whether it’s cans of beans, soda, or clothing, as the prices of one or more of the choices rise, the consumer will be more likely to consume the competing choices, ceteris paribus.

Investment Substitution Effect – As the price of an asset falls, the demand for its substitute often rises

However, humans can be rationally irrational when it comes to buying investments, and this relationship is often the other way around; many investors tend to demand more of an investment as its price rises. This is often at the expense of its equivalent substitutes, which will often fall in value on a relative basis. Intuitively, the reverse makes sense, too; as the price of an asset falls, the demand for its substitute often rises.

In investment and behavioral microeconomics, as the price of an investment (bitcoin) falls, the demand for its substitute (gold) rises. In the case of this analysis, the price change of btc is the independent variable.

Of course, we can never know for certain whether bitcoin and gold are perfect substitutes for one another, but if we view their behaviors through their recent market action in the wake of the promulgation of the now ongoing post-COVID central bank monetary intervention, we do possess more empirical data and observations that this is most likely the case. Moreover, we can rest assured that the powers-that-be also know this and have purposely established this relationship with its inculcation to the masses via the business media.

This blog had theorized since 2016 that btc was developed and released by dark intelligence simultaneously with the introduction of QE in 2008-09 as a tool to suppress the price of gold. And while we can never know for sure that this is the case, we can investigate and observe over the longer-term to determine if this relationship is valid.

While the price action of Au and btc over the longer term are positively correlated, and will trend upward in tandem with the increases in the money stock measures around the world, I suspect that Au (and Ag) will not rise as quickly as long as btc is around and being heavily promoted by the MSM.

However, from time to time, we do see how the prices of Au and btc play off one another over the shorter term, and if recent price performance is any indication, these assets are highly related investment substitutes.  While this relationship may not matter to some people, I view it as an important one when it comes to trading both of them in the short and intermediate term, and in a linear environment.

I mean “linear” in the sense that this relationship is stronger when the markets are operating as usual and volatility measures are lower than normal or typical. However, from time to time both investments may drop in value together if we have that proverbial “Minsky moment,” which forces investors and traders to cover and liquidate from any unforeseen market event, whether it be endogenous or exogenous. A Fed tapering pronouncement is one example. We also observed that the manufactured COVID crisis was another instance.

But it does seem that when the market for btc suffers adverse circumstances, gold responds more favorably. It also seems that this relationship works best when circumstances affect the price of btc, rather than when circumstances affect the price of gold.

Keep in mind that often when the price of an asset falls, it can have a sympathetic response with its equivalents. Investors experience this often with the stocks of companies in the same sector. But I am confining this commentary to within a particular sector, and that is of assets that are considered monetary equivalents and stores of value.

Long-term successful traders recognize these relationships in action. Contrarian investors leverage these opportunities for long-term gain.

37 thoughts on “Behavioral economics at work; Bitcoin was established to be a substitute for gold”

  1. I never heard of this man, but evidently he was an X Factor winner, whatever that means. Like what happened to me, he had a divine intervention that completely changed his life. Unlike me, however, he was a Freemason.

    https://youtu.be/7Eeo-82Eac8

    I think he’s for real, because he talks a lot about Jesus Christ and the spiritual battle between Satan and Jesus. Ultimately, that’s why we are all on his planet.

    He says it’s way too late to do anything about what is taking place and we need to prepare. But he says it’s a spiritual preparation more than anything else. Anyway, I suspect that place this video to try to salvage whatever life he has left.

    1. Chris, this is a perfect example as how they install someone in the public mindset and mainstream media coming out of nowhere. In his video Nothing he presented was new, and he cherry picked from more informative videos which are also still on youtube. Hair over one of his eyes, and wearing black and white attire. He is a low ranking mason earning his degree, and if you do your research you will see he is also related to well connected and wealthy individuals. Also Mr. Childs is not dead and will not be killed. Not only is his video still up, he will be Allowed to produce other videos, and you will be seeing him more of him in the near future. He’s using his video to get exposure. When was the last time you witnessed a regular average Joe get his video plastered on many alt new sites all at once in a short time frame.
      The only intervention he had was financial. He’s a spook.

      https://en.wikipedia.org/wiki/Altiyan_Childs

      1. I don’t get his angle, other than he is sincere. Anyone who is a plant sounding the warning on Freemasonry in the past doesn’t discuss Jesus. I was on his public Facebook, and he seems to be legitimate. He is right as far as I can tell on all he says. I have been studying this stuff for a long time and what he says jives with what I know. He speaks specifically of Jesus Christ continually. The upper echelons of Freemasonry specifically hate the name Jesus. Time will tell about his intentions. They didn’t believe Paul at first either, though I am not comparing him to Paul per se.

    2. I watched that full 5 hour video last week — I also believe him. I dis-agree with Greg that he’s being fake. If you pay attention he always stopped short of getting into the really bad parts of invisible freemasonry. Most of what he said is already readily available. He didn’t list any of the bad actors inside this group, etc. If he went into specifics like that, and he was still alive that would be questionable. But most of the info he said is already on Youtube, but it’s very nicely put together.

      Also, the hair and black and white attire really doesn’t mean much on its own. My hair before would get over one of eyes as well, and I wear black/white clothing all the time. Doesn’t mean I’m part of the synagogue of Satan. That’s why people need to be careful about the symbols. There needs to be more than a handshake to say someone is a member of this group. It has to be in conjunction with other concrete evidence.

      I don’t see any reason for them to have this video put out. I think he’s trying to spread the message, and fulfill his purpose in life after that divine intervention. Most people will ignore it.

      Also, most Freemasons are usually good people, and have no idea about the Invisible Freemasonry part. It’s an organization within an organization.

      1. I believe he is legitimate. He has definitely effectively ended his singing career in Australia. There is no benefit for the Synagogue of Satan to produce this video. The information is well presented and in one location. I learnt some new information from it concerning the witchcraft / satanism angle of this global satanic conspiracy. I think it may wake some more people so it has done a great job. It also gives the Solution that is Jesus Christ our Saviour. My only criticism is its complete silence on the Sabattean Frankist central control of it all ie the top of the pyramid. If he used the J word it would immediately be removed from YouTube.

        1. It is interesting how Freemasonry has exploited modern Jewry to further their objectives of the New World Order. This, in and of itself tells me that they hate Jesus more than any other person that ever walked this Earth, and that the Bible is the real deal. These elites try to present themselves as being biblical via being Jews, yet at the same time, circumventing the need to embrace Jesus Christ. And all the time, the real everyday Jews that walk this Earth are thrown under the bus. The worst victims here are the regular Jews who believe all this stuff; about being God’s chosen and not having to embrace Jesus like the gentiles. This poison has destroyed the Christian church. This guy points this out as well. He says the churches are all controlled by Freemasons and so are all the other major religions. Is absolutely correct.

          He does mention something interesting about how the Illuminati merged with the Freemasonry around the time of the founding of the United States. I’ve always submitted that the founding fathers who were Freemasons belonged to a different type of Freemasonry in the mid and late Seventeen hundreds. The bankers of the Illuminati used their monetary printing press to take over Freemasonry and leverage it for their purposes. We are now seeing the obvious results.

          While I have no definitive proof of my theory, I observe the actions, intentions, results, and personal lives of the United States’s founding fathers and those who have proceded them. The differences are stark.

          I observe the Freemason presidents of the twentieth and twenty-first centuries in the context of the founding fathers, and there’s no comparison.

          The United States had a good run, and as Manly P Hall’s writings tell us, The Illuminati’s secret purpose for the United States is now being revealed for everyone to see. God had a purpose for the United States during its founding, but the secret societies new of this God-given power and took the nation over and made it a tool for Lucifer.

        2. I guess we’ll have to agree to disagree. I know how they install people in a slight manner. He didn’t present anything new, yet his video was plastered all over the place, all at the same time. If you don’t see the clues then I don’t know what to say. That should be his last video if he was sincere. I’m not putting him down or anyone that finds his presentation interesting, however I do spot him creeping on in from the shadows. If you want to keep him on your list then go ahead.

    3. Hi Chris — I’ve listed one of my rental properties for sale a few days ago. The rest are leased up until Spring 2022. How do you think the real estate market is going to look like next Summer? I’m considering not offering lease extensions next year for most of my properties. Instead sell most of them next Summer, and keep a couple rented out. Is that your plan as well?

    1. Spot on with Fauci. Biden, Trump, Obama, Bush, etc they all drink from the same fountain; which is what most people do not understand. They do not have eyes to see and ears to hear. And it’s so obvious if you simply open your eyes.

      But this corruption goes back all the way to Abraham Lincoln. There are pictures of Honest Abe next to two people doing that same exact pose that Fauci was doing on that link you sent. Lincoln himself said at one point he’s more afraid of the bankers than of the Confederates. Allegedly, the person that assassinated him was a member of the Freemason society. Most of these Freemasons do a lot of good deeds with their visible hand. And they love to preach about those good deeds they do. But with their invisible hand they do the evil. See how that name suits them? Christ I believe said to keep the good deeds you do to yourself. Exactly opposite of Freemasonry.

        1. The bankers had motivation to eliminate Lincoln — he wanted to get rid of the Federal Reserve.

  2. President Trump is out there once again pounding the pavement and looking for support for the 2024 election. Notice that he just refinanced a $1.2 billion mortgage on his largest individual holding.

    https://www.google.com/amp/s/www.sfchronicle.com/local/amp/Trump-retains-ownership-of-S-F-property-after-16192528.php

    Evidently, the owners pulled out $600 million in cash and refinanced down to 2% on the interest rate. It’s becoming clearly evident that Donald Trump will once again be the opposition for the Republican party, and will guarantee that whoever is running for the Democrats will prevail.

    The borrower is always servant to the lender, and we know who are the bankers and lenders for Trump. Trump makes a big name for himself and fulfills his role to his bosses. His boss is just gave him a lot of money and now he needs to do their bidding.

  3. The county and state governments in Maryland are beginning to hassle me with my properties and my tax returns. They want to inspect everything, although there is nothing wrong. Their intent is to make my life a living hell. This will turn out as a good thing, as it is a sign to get out of here and to do a 1031 exchange and buy improved farm and ranch land where I intend to end up. If the government hassles me I just won’t give them any capital gains tax money. It’s God’s way of preparing me for what’s coming, and to get out of Dodge.

    By the way, my great-great grandfather was a sheriff Dodge City Kansas.

    1. Was your grandfather a freemason? Almost impossible to achieve that job title without being one, especially back in the day.

      I think they are building up the Republican party. The entire year of hoaxes and the so called Capitol riots and election fraud are wearing people down. Trumpster always had huge debts, which Sheldon Adelson helped out with before passing on so yes we absolutely know who owns the orange man. The people getting prime time in the mainstream are apart of the club, they are the adversary.

      All the alt news websites are pushing everything out to 2025 now. Vaccine deaths, China conflict, etc. And when 2025 comes they’ll be pushing it out to 2030.

      Any stock picks? I’m amazed at the huge float stocks that spiked 1000% wise on fluff PR’s. Just think if they did that to lower float stocks . That stim money must still getting pumped into certain areas, regardless of what the media says it’s not those little Robinhooders or Wall street betters.

    1. How many pastors and preachers do you hear talking about the adversary? Our adversary is controlling all the levers of power politics, finance, education, and religion. I know of one Pastor who talks about it quite often, and he’s being forced on to Brighteon, and gets very little sponsorship.

      I think of how the secret societies have been working together for centuries to bring forth their new world order. They are getting very close to the target, but the closer they get, the less likely they’ll get it. God’s going to see that it goes up in a ball of flames.

      Unfortunately, very very few in the church today are warning their congregations. This is a spiritual battle and the remnant Christians and diehard satanists know much more about this world than the 95% of the profane and vulgar. That description may sound harsh, but our adversary calls us profane. Our adversary says we deserve what we have coming, and they’re not wrong. The end is in sight, gird your loins. Humanity will not be allowed to continue like it’s being portrayed in the Syfy movie propaganda. Events and circumstances are all coming together. Those with eyes to see and ears to hear can perceive it all. The vast waves of the profane I have no idea what they are up against, but they will lose their souls in the process.

  4. My concern about cryptocurrencies here is simple; recall that the Colonial pipeline shut down was a ransomware attack, and evidently they paid the ransom with cryptocurrencies. This could be another excuse for all governments to crack down on non-regulated cryptocurrencies.

    But here’s the kicker. The technological legwork has already been completed and the advancements are far enough along that the privately-run central banks can pick up the baton and run with it from here. The livestock programmers fulfilled their purpose.

  5. Be on the lookout for asset price drops. I would have to conclude that the rising gold price here is telegraphing us something and I look at stocks like LOW that show poor chart action on The daily. Bitcoin is deflating by the hour and my crypto and stock trading accounts remain mostly in cash. I never worry about missing out on profits, I always concerned myself with being the bag holder. Live to trade another day

  6. Re: ATT (T). I no longer like the stock and I would dump it. I only recommended T in the past for the dividend anyway. The dividend yield will drop by about 45%.

  7. Lots of talk in the MSM regarding UFOs and aliens. Every month it gets louder, and it’s being promoted legitimate.

    All those sci-fi movies have been getting us used to it.

  8. Hi Chris,

    I liked your btc/gold analysis. If I may pick your brain do you see other relationships where similar substitution effects play out in commodities or stocks?

    Great work again thank you.
    Best regards,
    Dean

    1. It’s much more difficult to make direct connections with different types of asset classes. Some may work for a time, but in other instances, the relationship falls apart or even runs opposite. I chose gold and btc, because their connection as stores of wealth is rather obvious in many regards. Another investment substitution would be when investors rush into sovereign bonds when stocks and other assets fall. As of right now, all the performances of the major asset classes are highly correlated with the expansive monetary policy, so determining a definite relationship between two or more asset types based on recent data would be misguided. Bonds have held up here even though they should be getting punished.

      I do see a positive correlation between value stocks and commodities. I guess that is an intuitive one to observe. Normally bonds would be getting beat up, but with the QE running hot, even that relationship is faltering. If I can think of any, i will post it.

      1. Hello Chris,
        I think bitcoin and other cryptos are being used as an inflationary alternative to gold. My hunch is that the powers that be want to steer everybody away from gold and silver and towards cryptos so they can hoard the gold and silver for cheap. I never felt comfortable putting any money down for cryptos because it is not a physical asset that you can hold nor does it pay income. Gold and silver coins are physical assets that you can hold in your hand. I never cared to trade gold and silver for profit, however, I feel precious metals are a good survival asset if our dollar becomes worthless. I certainly care not to invest all my savings in precious metals but I view it as a financial equivalent of long term storage like those long term food storage items for when the SHTF scenarios. Silver and gold are not great at generating profits. If you can get rural land then that is a great idea if you are lucky to find it as everybody and their brother are buying rural land.
        Andrei Z

    1. Wow. what this article says would make Markus Wolf, the former head of the East German Stasi, blush. Wolf was a consultant to the U.S. on the prototype Patriot Act legislation as it was formulated during the 1990s.

      This “police” force is nothing but a high-tech, privatized Stasi.

  9. Chris, since the government has been masking inflation for years now, having them admit to it is obviously a ruse to justify something coming down the road or else to make the sheep react in a pre-determined way. What are they trying to accomplish? You said not long ago that they still hadn’t finished putting the control grid in place so they are not ready to raise rates, so I guess that is not the answer.
    They know people will react by taking their money out of the bank to either spend before prices go even higher or to put into gold, stocks, crypto or real estate. Is this bc once in these volatile markets they can shake the weak hands (i.e. the average retail investor) out of what would have been their savings and impoverish people still further?

    1. It’s all part of the gaslighting process. The Feds say housing costs rise at 3%, yet house prices climb 20%. They say CPI is 4.2%, yet it’s triple that. Like you theorize, the goal here is to get everyone speculating and spending, so they can’t save money. Money earns nothing anymore, and the banks don’t even need it.

      The more that people speculate, the easier it is for the PTB to shake the tree from time to time, as you say, and fleece the public. This consolidates the wealth.

      Recall from my article, that the typical novice investor and trader is attracted to rising asset prices, and that rising asset prices stimulates demand for those assets. Throughout the first half of last decade, I had little competition at the real estate auctions and foreclosure listings, just a bunch of lowballers. I depleted my cash and liquid assets to buy up as much as I could back then. Today, after prices rise by almost 50% in the past 7-8 years, investors are tripping over themselves to buy up everything available and then some. These investors are not contrarian and they do what most others do. The wealthy speculators are attracted to low prices. These are only a few.

      The PTB use the internet data and their media to create the boom/bust cycles. They know how and when to pull the trigger to maximize their exploitation of humanity. This is why the internet is not the great equalizer. We have to do what others are not doing. I am no longer buying real estate. I have enough. I am no longer adding to stocks, i bought back in time. As prices run up, we assume more risk, and to capture that incremental gain, comes at more risk.

      We are one more manufactured disaster away from bankrupting 50% of the American population. They are being lulled asleep again and are getting careless.

  10. Chris, can you give me your opinion about Martin Armstrong (armstrongeconomics.com) and his predictions (socrates). As an expert in the economic sphere of influence of the tribe that you are, I would appreciate it.
    Thanks.

    1. I haven’t followed Armstrong in quite some time. I attended his Princeton conference in late 2015, and at the time I thought his predictions had merit. But, who was I to know? I never heard of him until about 2013, but he sounded so certain of himself, so I got suckered into ponying up about $3,000 to attend.

      That big bang prediction of late 2015 was the biggest error ever made by any prognosticator, yet he was still pumping it as having happened four years later.

      However, on Henry Makow’s site in 2015-2016, I contradicted him in two important aspects; I was bullish on real estate and bonds via the continuation of QE. Yet his Socrates was saying the opposite. Now my complaints on my blog regarding Armstrong and his inability to recognize his errors went back to late 2016, when I realized by then he was full of hot air, until about a year-and-a-half ago. His inability to recognize the power of QE was the undoing of his entire model. By completely being wrong with regard to sovereign bond yields and bond prices, he had everything flipped around, though he was right with stocks. And because of this, he had had gotten many things wrong. He underestimated bitcoin and over overestimated his predictions for gold. For about two to three years I was complaining strongly about his modeling and voiced my belief that he was just making things up. I am 95% certain that he has absolutely no mathematical algorithm that could determine all this stuff.

      Anybody who chalked up the past 10 to 12 years to cycles has been completely wrong. There were a lot of people in the alt-financial media about 5 to 6 years ago who were copying him and kept barking on about cycles. They used it as an excuse to talk about bonds blowing up and real estate collapsing. They also talked about stocks coming back down in their cycles. They said gold was in a cycle to go to 3-5,000. They were all completely wrong and we’re in way over their heads regarding their understanding up this system. I have to believe that many of these people who wrote these articles were doing so out of their mobile home trailers.

      The problem with Armstrong is that there were a lot of copycats who pretended to have similar models. They were all wrong as well, but Zerohedge promoted them all. They were wrong as bond yields continue to fall, stock prices continue to rise, and real estate took off.

      Moreover, Armstrong refuses to recognize any conspiratorial aspect to how the financial markets operate. I asked Armstrong myself in late 2015 at the conference if he believed in any conspiracies, and he laughed in my face. He actually got angry.

      He often speaks highly of the Federal Reserve System and places the potential for catastrophe at the feet of stupid and greedy politicians.

      He creates a lot of red herrings for his followers, and when I attended the Princeton conference, these Armstrong dummy disciples were legion. I haven’t looked at his blog since before the beginning of the covid crisis, so I don’t know what he’s saying now. All I can tell you is that he’s full of hogwash.

      He’s a marketer, and he’s one of the legion of personalities in the alt-financial media who try to desperately position themselves as an indispensable go-to person. He has a ton of services and products to sell and that’s how he stays in business.

      I used his Socrates for a couple months after the conference and it was bunk. Whenever someone complained about Socrates, he would just say they’re not seeing it or using it correctly.

      Notice how he never complains about the elephant in the room. That should tell you all you need to know. He was a useful idiot for the S of S from 2011 to 2017.

      Stop reading his blog. You will be much better off.

      1. He was also wrong when he said the reserve currency can’t hyperinflate.

        The $ system has already hyper-inflated since 2009.

        We’re getting close now, the Reset actually is quite close; the system can’t be really modelled in the short term anymore since there’s far too much non-linear political decisions influencing the global economy.

        1. Sounds about right. There is too much management and political input to be able to predict beyond what’s in front of us. Take a look at this chart to see how the USD M3 growth has risen higher than some other currencies.

        2. I just read the first four or five pages of Armstrong’s blog. Armstrong is a highly skilled self-promoter, and I am most certain that he has been able to maintain a customer base.

          I found his Wikipedia entry an interesting one. All I can really say at this point is that he’s a convicted finacial felon who concealed hundreds of millions of dollars in trading losses, while most of the predictions he made 7-8 years ago didn’t pan out.

          Granted, he made some bold predictions and most never go out on a limb like that, but if you’re going to charge that much money you better be more correct than the average person. I noticed that as the years went by, his philosophy converged with the alt-financial media. He is a shrewd businessman and he knows this is from where he obtains most of his business

          Now, it seems he’s out with another bunch of ideas. I am sure many will find him interesting enough, so he can produce some more conferences.

      2. The tribe already gave him a warning and now he knows what awaits him if he doesn’t behave.
        What I did not expect was your bad experience with him and your disagreement with his economic analysis.
        I will take your advice.
        Thank you for your time and knowledge that you share.

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