My Kinesis referral link is here. Please sign up to Kinesis after this if you feel this is something for you!
I have tried to tell some of my friends what Kinesis is, and with the current state of crypto exchanges and cryptos going to near zero, with Bitcoin down 70% or so, my friends’ first reactions are fear and hesitation. I’d like to provide all of you something you can give your friends for information.
And – everyone needs to understand this is gold and silver on a blockchain and NOT a speculative bet on if a crypto will moon tomorrow!
What is Kinesis?
Kinesis is a term that I dubbed “Asset Backed Digital Currency”. At the very root, Kinesis uses digital tokens called KAU (Kinesis gold grams) and KAG (Kinesis Silver ounces) which are backed by metals in a vault. For example, if you buy 1 KAG, you have “title” to 1 oz of silver in the vault. You can store these tokens on an exchange, or take off the exchange into your private wallet. You can send KAU or KAG to someone else as well.
At the root of Kinesis is 9 vaults all over the world. This is from bullion company ABX, which Kinesis seemed to be founded based off of. Meaning, they sort of took the old model of vaulting gold or silver and charging you for it, but then added a crypto front end. Historically, you could buy gold in a vault at higher premiums, then pay storage fees monthly. If you wanted to do something with that gold, you’d have to sell it, then transfer the money back to your back. Perhaps you had 1 oz gold bar or a 100g bar, and only needed $60. You would have to sell this, then transfer the cash to you, to pay the $60.
Gold and silver SEEM to be a good long-term store of value, but they have mostly been rendered obsolete by paper currencies, and now debit/credit cards. It doesn’t seem practical to send thousands to someone to buy metal you will never see, never touch, would not get yield, and cost you monthly to own it.
Kinesis allows you to either send in your gold and silver to add to the vaults, “mint” gold and silver with them to have them go add, or you can buy on their exchange there. You get PAID to hold your metals there. And – you can spend them with a debit card or virtual card – more on that below – so only what you need is sold. You can then, at a later time, take your metals out if you want and they will send them to you.
Note: I’m not a paid sponsor of anyone, and everything I’m writing here is my IMPRESSION of Kinesis and how everything works. I’m not doing a book report on them and this is NOT a paid promotion, so the nuts and bolts of their operations can be found on their pages. I reserve the right to get small details wrong.
Why would I buy into Precious Metals?
I have written a few pieces about “layering” gold and silver investments. For many of us, we might want to get involved with the precious metals, but it’s too risky to store much of anything at home. If you live in an apartment in NYC with others, it makes little sense to store thousands of ounces of silver there. If you live in a nice neighborhood – you can get robbed, but there’s also risk of fire. Perhaps only if you lived rural on some sort of homestead with a giant vault might you feel really safe to hold a lot of metals at home.
You often hear, “if you don’t hold it, you don’t own it”. It is true, to an extent. But anyone who likes precious metals also goes through any form of risk assessment about storing at home. When dealing with risks – you can AATM – Avoid, Accept, Transfer, or Mitigate. Everyone’s risks assessment will be different. I can perhaps mitigate the risk of home invasion with a vault or gun – or even Transfer the risk by trying to insure it. However, many might transfer some of that risk to vaulting. There is a risk of vaults being crooked, or not allowing you access to your metals. However, you have to shop around for what makes sense for you.
My PRIMARY investment is in Real Estate rentals. I got into PMs to HEDGE my downside risks of equity. However, PMs by far became my FAVORITE investment. With my layering strategies, I also talk about using miners as a way to play the metals leveraged. For example, if you think silver would go from $25 to $50 in the next year, the financial energy of cash you put in would double. However, if you bought a silver miner, the multiple could be 3-30x, depending on the level of risks you had with that type of miner. So MY allocation to physical is limited, as I’m playing this move MOSTLY with miners. You do you. Miners are HIGH on the risk curve. I am 47 and have no 401k, and make a great living, so I can afford to lose money with miners. You may not.
But why PMs at all? I talk about this scenario below – metals are part of the MONEY asset class, and with this, MONETARY SUPPLY INFLATION…IS INFLATION.
Imagine 100 years ago, you have a $20 bill and an ounce of gold. At the time, they are of EQUAL value. 100 years later, you open the vault, and nothing has moved, but the gold is worth now 95x the $20 bill. Did gold APPRECIATE 95x in 100 years? No, the currency was borrowed into existence so much, that the dilutive effect of this currency decreased its value by 99%.
In the last 2 years, the US “borrowed” 40% of all money ever created in the history of man into existence. When this money is borrowed, it finds its most efficient and effect path to get the most for it. It runs into one of three asset classes – money, business, or property. It bids up something in asset classes, then becomes overstretched relative to other asset classes and corrects itself. Imagine pouring water into something and it sloshes all around. This is financial energy sloshing about asset classes over years.
Now imagine, that with the VAST amounts of financial energy borrowed into existence, that overvalued stocks, bonds, and property may be sold into a recession and PRESERVATION of wealth would then go towards gold and silver.
The base case here is perhaps 40-50 years of currency creation is about to slosh into the value of gold and silver in a VERY short time. Because these markets are smaller, there can be a rapid move up and back down. Imagine that safe you were thinking about put one ounce of gold in the vault in 2020, alongside $2000. You open up the vault 3-4 years later, with all of that currency creation, and you may have gold that is now worth $2500-$3000. The more currency created and borrowed into existence, the more asset classes get pumped up over time. It just may take time for all of that currency to slosh around everywhere.
This means if you put $2000 into your bank in 2020, that it might have the spending power of $1400 or so today. You SEE “price inflation”. In reality, that means “you need more currency units to buy the same stuff”.
Imagine in 2020, you had bought gold and silver in a vault, and wanted to spend it next year to PRESERVE that spending power. But you didn’t want to buy at jacked up rates, and you wanted to perhaps spend a little at a time.
In countries with high levels of price inflation – currency could be depreciating in purchasing value by the week or month – and you SEE prices going up in that currency. But if you stored that financial energy in metals rather than currency, the value of that asset class could go up at the same rate of inflation. Meaning, perhaps the $2000 you put into a gold oz in 2020 may eventually see a value of $3000 next year. That oz of gold would buy you the same amount of goods that it would have in 2020. You did not GET RICH from $3000 gold. RATHER, you PRESERVED PURCHASING POWER. This is the big thing many new gold bugs miss. It is POSSIBLE to catch gold at the right time to then make a 20-40% trade, but in reality this may be a long term and gradual move up.
If you can buy gold and silver every month, and then spend portions of that, it would stand to reason that, over a long enough time period, you are preserving purchasing power. Imagine I had bought 1000 KAU for $60,000 in 2020 and each month I add $1,000 in KAU, and maybe spend $600 of that on groceries and gasoline. Perhaps in 2024, gold goes to $3,000 and suddenly, I wake up and the value of the KAU is $90,000. I had also been putting excess financial energy into this system for years.
But how? Kinesis now has virtual debit and physical debit cards that I have yet to get, and want desperately. Before, it was a pain in the ass to get cash to Kinesis via SWIFT to Australia, but now it seems easier to add to my account to TD Bank in Rhode Island. Imagine today I sent cash to Kinesis, and bought 100 KAG for $2500.
Next week, silver goes to $30, and the value of my KAG is $3,000. I could go to the grocery store and buy food using that card, and behind the scenes, the exchange would automatically sell my KAG for the precise amount I needed. In essence, I got roughly a 20% discount on my groceries due to the spending power of my silver had caught up to the monetary inflation in our system.
But, over time, I want to continue to add to this more than I spend. I want to use it as a long term savings account, over the next 30-40 years. Silver is more volatile than gold, but using the safe example, you can see the possibility of metals holding that spending power over longer periods of time.
Perhaps when I’m 70, I have thousands of KAU. Perhaps the stock market is at all time lows and property prices bottomed out. I can sell my KAU on the exchange at that time, or perhaps I want to get 100g bars sent to me so I can give to my children and grandchildren.
Kinesis is not doge coin. It’s not ethereum. It is vaulted metal that you can spend or send to others, instantly.
Is there risk with Kinesis?
Kinesis is not without risk. If you talk to BTC people, they want to blast something like this because it is a direct challenge to it. Bitcoin liked to market itself as digital gold. However, Kinesis actually IS digital gold. Bitcoin likes to make the argument of scarcity, with only 21m bitcoin ever to be made. However, it can be broken down into millions of tiny fractions. The argument against gold 100 years ago, was that it’s not practical to walk around with pockets of gold and silver – so they created the paper money to combat this. It made this money more portable, and ON the currency itself, it said, “pay in gold” or “pay in silver”. The paper currency was a RECEIPT for the gold and silver.
Over the last 50 years, they have taken gold and silver out of the backing of the currency so they could print/borrow to infinity. Had they somehow tried to keep this link, gold might be $250,000 per oz and silver might be $10,000 per oz. There is a ZERO chance we may ever do a gold BACKING again, but I feel gold is coming about again, which I’ll talk about in the next section.
Kinesis has risks, and you have to determine your risk appetite. The APPEAL to me is to be able to put USD into this system to buy and store metals, but also do use them as money again. Digitally. If you take an oz of gold to the store to get a loaf of bread, you give them $1900 in gold and how do they get you $1895 back? With Kinesis, that KAU is a gram of gold, worth roughly $60 today, and it could sell .08 KAU instantly to get you that loaf of bread with a transaction fee of .45%.
But the risks here are – “can the company continue to pay its staff”? You can see on the site how much it has collected in fees. What has been smart is the KVT purchases have acted like shares in a company, and math would dictate that the KVTs, if all sold, would generate $150-$600m in seed money, depending on how much the KVTs were sold at, to who, and at what price. My bet is that can help them for quite some time yet if there was any going concern, but you can see that they need a lot more adoption in this for it to be self-sustaining for any long period of time. It my BET, that with a coming gold and silver moon like many of us have never seen, that this platform will be a worldwide leader, in a VERY rapid time.
The coming virtual/physical cards for people to the masses on here will instantly help people like me use them daily. I plan on putting $1500 or so per month into it, and use roughly $600-$800 in gas, groceries, or eating out. Anything left over will be nothing but long term savings. My bet is this is what a lot of users plan on doing with it. But they need this rolled out to all of us soon, as many of us want to RABIDLY get more family and friends signed up to this, in advance of massive moves up.
The next issue comes with – it’s not a US based company. It is based in Australia, but they recently moved the headquarters to Lichtenstein. I don’t know a damn thing about that country, or its regulations. With the crypto exchanges blowing up recently, one then has to be concerned with how the exchanges are run and what oversight is being done. What helps me sleep at night is this company is more or less, for all intents and purposes an extension of a 12 year old vaulting company. Their entire existence relies on trust, security, and regulations. It is thus my BELIEF that everyone involved with Kinesis, from top to bottom, WANTS TO RUN a CLEAN and FAIR exchange, with as much transparency as possible. You can see on the websites how much of what is in the system, as well as 3rd party audits. The main issue you had with FTX and to an extent now Binance is many of these orgs have zero regulation and do not allow any types of audits.
The MAIN difference here is that when you “mint” gold or silver, they go out and buy it and add to the vaults. My guess is that they have piles in these vaults in reserve, and simply the title is changed to then add to Kinesis. But, the metals are NOT owned by Kinesis, they are owned by YOU. The crypto exchanges would have fine print, very similar to what a bank does in that with banks and non-asset backed digital currency exchanges, your deposits are their assets and you are a credit against them. In the case of Kinesis, think of it as a segregated vaulting, where they have a basket with your name on it, and they have no claim to it. Their job is protecting the basket.
More risk you may have is that the US may try and crack down on non-US based exchanges like this. I could wake up tomorrow and they will be prevented from accepting my cash, or being able to get me cash back. I cannot even begin to think how deep this rabbit hole goes, especially how this product works with precious metals, which are essentially hedges against fiat currencies.
What MY interest in Kinesis is, in the short term, is to start layering gold and silver in their vault and spending it as prices of things increase – as metals do – to preserve purchasing power and increase my vaulted holdings. IS IT POSSIBLE that I get to 100 KAU or 200 KAG and ask for the metals out? Possible. But I may have a limit there of perhaps $10,000 or $20,000 that I’m comfortable there. Remember, I LAYER. So I might also use OneGold, PSLV, a vaulting company like goldsilver.com – but remember, the BULK of my PM interests are with miners. Perhaps each month I put $800 into Kinesis and $1000 into my trading account to buy more miners.
As time goes on, I will trust Kinesis with more and more of my products. I may also open a LODE, CACHE, or GLINT account to diversify across other metals-based tokens. I prefer Kinesis today because it is the largest, I own a bunch of KVTs and thus I’m invested in its success, and I love the virtual/physical cards. I see a REALLY good long term future with Kinesis, and it is POSSIBLE that competitors of Kinesis are much higher risk due to Kinesis market share. If Kinesis grows much faster than the others, they may fail under their own overhead. It’s going to be a situation where you may have a few of these that compete like Visa/Mastercard. With Kinesis quick transaction times and low transaction fees – this might also be picked up by a lot of big business.
Overall, Kinesis is not without risk, but it’s a way to LAYER investments in the PM world. Time and continued growth will de-risk Kinesis a lot more, but I’m early in on this and plan to be with them for as long as they are around.
The big takeaway here is that this is the vast difference between ANY NON-ASSET BACKED DIGITAL CURRENCY and ABDCs.
With Ethereum, bitcoin, titscoin, whatever – this is the BASIC premise. There is a spot on a blockchain with my name on it. You pay me X amount of dollars to have my parking spot and put your name on it. You ASSUME that someone else, down the road, will envy your parking spot. You ASSUME that merchants may find this parking spot valuable. In reality, someone just sold you an empty parking spot. They sold you….nothing. They tell you…”the ledger!!” These are the same people behind FTX.
Now below, is an ASSET BACKED digital currency. The BLOCKCHAIN doesn’t have an empty space, but rather a TITLE to something tangible. This TITLE allows you to then, at ANY TIME, collect the underlying asset. In this case, gold. Imagine I have an ounce of gold, titled to me on the blockchain. I SELL YOU THAT TITLE. THAT is the beauty of the blockchain. How anyone can see TITLE to REAL THINGS.
The problem is, that bitcoin went from $1 to $70,000 inside of a decade and you then get super smart people acting like Branch Davidians in a cult. They are selling you on some form of scarcity, and how someone else may envy what you have. You have an empty parking space. Someday, when this is realized, collectively, there will be a lot of heartbroken people. It doesn’t mean you can’t SPECULATE on this. It means that you have pretty much zero clue about the level of risks these assets have, and no one selling this to you wants to admit to it.
In my gold/silver space, you have a few people who SPECULATE a SMALL PORTION of their wealth thinking that this could go to $1m. They could be right. Maybe not. But these guys might have 1% of their entire portfolio of investments in this type of risk.
Likewise, Kinesis has some risks, but they are FAR LOWER than any non-asset backed digital token because KAU and KAG get their values from the gold and silver markets, and not supply/demand of an empty parking lot. The Kinesis exchange is not without risk, but again – this is part of a LAYERED PM investment strategy. Out of all of my PM holdings, today, I may have 5-10% in them, but over time, I would allocate more to them as trust grows more and more.
Note – I don’t go into the security nuances with their specific blockchain. Bitcoin purists like to try and attack blockchains and their security as a means of superiority, not realizing they are selling you an empty parking lot space in the process of telling you that you cannot secure your gold properly. There is security risk with any of this. But it is minimal. This is a vaulting company that does security for a living, and my best guess is they are extremely competent with this security.
How Kinesis fits in with how the world is changing
I have written a ton over the last few weeks about commodities being money. The traditional financial advisor puts 60% of your investments into stocks, and 40% into bonds. This allows you to capture the asset inflation of the business class by capturing manic moves up in good times, but then also defend against downside risk with bonds on risk off. This strategy has worked for 40 years in a continuously lower interest rate world, but is now in danger.
Zoltan works for Credit Suisse and formerly worked for the Fed, and it seems like everyone on FinTwit listens to him like an Oracle of sorts. No idea why (I’m not an industry insider), so I’ll take what he says as something to listen to.
In the past year, he has said, “commodities are collateral, and collateral is money”. In this type of environment we are in today, we are not in the 150 years ago where we had a gold BACKED system. We are in a credit creation system, and credit is given based on risks and collateral.
Instead of the 60-40, he suggests…
“For Pozsar, this means that the usual 60/40 method in portfolio investment won’t cut it anymore. Instead, he suggests 20/40/20/20 – cash, stocks, bonds, and commodities.” Found here
So you can hold cash (currency, not money) to buy dips on things, but would you hold cash for any significant period of time during high inflation? Perhaps not. However, look at the others – 40% in stocks (rather than 60%) and 20% in bonds (rather than 40%). The real big shocker here is 20% in commodities. Meaning, MONEY. Cash can be great in a sudden deflationary period – think about how stocks sold off in March 2020 and how if you had cash on the sidelines, you were able to buy your favorite everything for 25-50% off.
I believe the world is accumulating gold now in order to then create credit against it. I believe this gold will be used to price things in world commodities exchanges. You can see in the last few years, gold exchanges are getting stood up everywhere. Likewise, with the US weaponizing the world’s reserve currency, it stands to reason that the 60% market share the USD has today in world commerce will shrink, by a lot, in future years.
You can see that since the global financial crisis in 2008 that central banks are continuously holding more and more gold in world reserves. It stands to reason that given the US’ actions, one could expect even more gold buying. And that’s precisely what we have seen in 2022.
My contention is that perhaps 5-10 years out, you may have world BRICS+ exchanges using gold as the means of exchange for commodities. Gold has a 5,000 year relationship of value, to things, and with that, fiat currencies do nothing but try and confuse and distort these relationships.
For example, a cow here might be worth $3800. There’s a lot of variables with this, but let’s assume a specific breed has a cash USD value of this. Gold is about $1900, so you can get roughly 2 oz of gold for a cow. In 1900, a cow may have cost about $15. An oz of gold then was $20. So in those times, you could get perhaps 1.3 oz of gold for this type of cow.
However, across most cultures, for all of history, you may be able to observe this relationship. Whether you are Saudi, Chinese, Russia, Brazilian, or French – some form of gold to cow ratios exist. If cows cost too much, maybe you mined more gold or made more cows to capitalize on the high costs. Remember, the solution to high prices is high prices, so all of this regulates itself with respects to the money involved.
What clutters things then is fiat currencies. Governments love to print or borrow these into existence to get a lot of stuff for them. The sell bonds, and promise to pay you back based on future tax revenues. The truth of the matter is that they borrow way too much, then distort gold prices lower to mask the sheer volume of currencies they created. Gold prices eventually catch up to an extent, but if one country’s fiat currency is dominant, this can then tend to have them as price setters for a lot of things with their exchanges.
I believe there is a world coming inside of 10 years where commodities are mostly priced in gold grams, and price discovery is made outside of our borders for a lot of things – specifically, metals, which we don’t produce a ton of relative to the world. Could we be the price makers for grains? Sure.
But let’s look at how we produce metals
It then stands to reason we could lose pricing power for gold and silver.
What about food?
I believe it is safe to say that we can still be dominant with USD if we demand payment on our exchanges in USD for soybeans.
However, I believe that these exchanges via BRICS+ will have gold grams required to buy. This is the universal money, and with this, I believe you may start to eventually see things like cows bought from them priced in grams of gold. What you COULD do is buy into these exchanges by either depositing gold and getting gold tokens to spend, OR you can have gold tokens from private exchanges to buy in.
For example, recently Ghana has forced gold miners there to sell them 20% of their gold in the local currency of cedi. Ghana can then deposit this gold into a BRICS+ exchange and get gold tokens to buy whatever they want from these exchanges. If you are in China and have cows to sell Ghana, perhaps China sells them this cow for 62g of gold (2 oz gold). China then gets these gold tokens in their account. They can withdrawal this gold into their possession, which Ghana deposited, or they can use this gold to buy Soybeans from the US. China could pull this gold, sell it to exchanges for USD, then use this USD to buy soybeans from the COMEX on contracts. In this respect, IF the USD continues down this path, they could perhaps always be a 20-30% world currency that is used, but not THE DOMINANT currency. I believe most of the world will move to gold-BASED exchanges.
In this respect, companies will be able to have Kinesis accounts. They will be issued KAU if they deposit USD. These companies can then buy silver, aluminum, lithium, etc from BRICS+ exchanges as KAU are converted to a BRIC$ token at time of purchase. The Kinesis vaults (and others) would have to be BRICS+ certified, so all members of this can trust that the gold is there. Likewise, gold can move from these vaults, but ideally, these vaults have trust/regulations with each other.
What I can see, is that as the USD DEMAND is reduced, it means that since people don’t need it as much anymore, the supply of it then starts to move into things. This is where all asset classes inflate even higher in future. Meaning – it is VERY easy to see a $3000 gold price based on the currency we have recently created, and then perhaps a path to $5,000 to $10,000 by 2030 based on how the USD demand may decrease globally and how gold may be used as a dominant form of world reserve currency.
IF you are using Kinesis and store gold/silver there, and you stockpile over the years to come, it’s an easy way for you to preserve your purchasing power and spend along the way. However, if you are a company that might need to buy metals from exchanges, or other good from BRICS+ based systems, it also could make sense to have corporate accounts with these types of systems in the future to the be able to buy goods with KAU/KAG.
You also have Indonesia (6th most populated country in the world) using Kinesis within their government to pilot a program. In some countries, you may have expatriates working abroad, and to pay them – well, it might be easier to pay them in KAU and this can then be transferred into any currency locally.
Additionally, I used to like the idea of bitcoin for this one reason. Imagine you are in Turkey, and need to flee the country immediately. You cannot use SWIFT to transfer bank funds – as maybe sanctions happen. You cannot take gold with you on a flight. It made sense to buy BTC in lira, and then at your destination, sell the BTC for whatever the local currency was. However, Kinesis does this better, as on the other end you have gold, and you can get that gold cashed out in a local currency, OR you can keep it there, or get it sent to you from one of the nine vaults worldwide.
No one has a crystal ball, so what I’m saying cannot happen 100% how I’m saying it. But you have to look at the body of evidence coming…
- Governments more and more want to go cashless and use CBDCs. Many populations will rise up against this. But the need is there.
- Fiat currencies are dying, and quickly, from debt creation. The debauchery of currency is accelerating, and it is my belief that a BRICS+ union wants to get sanity back to the value of goods. They no longer want green slips of paper, but gold.
- Gold exchanges getting stood up everywhere now
- BRICS+ alliance was 5 in 2006, 16 or so in 2016, now perhaps close to 100 nations which comprise over 50% of the world’s population and 60% of the commodities produced.
- Central bank gold buying since 2008 has increased every year
- There has not been a recession since 2009 here, and higher interest rates to fight inflation create a condition where gold may move, very soon, very fast, as rate rises stop
- 40% of the USD ever created happened during the pandemic
- Crypto got the blockchain right, but didn’t understand deeding/title applications to this. ABDCs are an innovation to use the blockchain to title things.
- Gold and silver could not be used as pocket money due to how inefficient it was. Paper money helped this, but now blockchain is the next evolution of how gold and silver can be used as money again.
- There is a difference between a gold BACKED system (which we will never have again) and a gold BASED system which I think is more likely to happen inside of the next decade
- Shortages in metals are all over the place, as our exchanges have artificially pushed the prices down too far, which will lead to other exchanges being able to physically supply the metals at higher price points for producers. This will have an inflationary effect on the cost of these (or also boost the value of items you already own)
- The US abuse of world currency reserve power, sanctions, and seizing world reserve currency has now opened the door for alternative BRICS+ solutions to come in to play. All of these nations have hundreds and thousands of years with gold and silver as money.
- Kinesis holders of gold, silver, and KVT will have tremendous upsides over the next 7-10 years as the world moves towards precious metals on the blockchain. It might not be gold BACKED currencies governments use, but I believe markets will use gold as the pricing mechanism, and with this, money will be here again in the form of gold. Those who produce commodities will be able to borrow against it.
- The Kinesis virtual and physical cards need 100% rollout inside of 3-6 months to allow holders to stock up on PMs and then be able to spend this to show the use case. This will lead to mass adoption of these types of ABDCs.
- I also believe ABDCs can then be related to contracts of other goods. I’ll leave it at that because you start getting into CFTC and SEC territory, but I believe world exchanges will be stood up based on gold at the center.
With that – good luck to all, and don’t forget to use my Kinesis link to sign up!
January 15, 2023 at 4:30 pm
Nate, good article. I have been looking for something like this for a while. I will dig deeper. As a matter of interest did you watch the Wealthion interview with Alistair Macleod? If not you will find some very interesting comment on BTC in the last 10 minutes. That said the whole interview is worth watching. https://www.youtube.com/watch?v=rNR851IFhWQ&list=PL7vUOWh5dtHN0HL-ckjHLeXfW8vZgo0H8&index=2