The Rise of Bitcoin and Gold in the Revolution of the Currency System

In recent years, the correlation between Bitcoin and gold prices has significantly increased, closely related to the arrival of the "post-pandemic" era. Against this backdrop, Bitcoin is expected to participate in major changes in the international monetary system. This article will explore why Bitcoin has the potential to become an important participant in the transformation of the international monetary system in the "post-pandemic" era.

The core idea is that the current transformation of the international monetary system will unprecedentedly accelerate the "gold" attributes of Bitcoin, gradually bringing its value as a reserve currency into mainstream view.

Looking back at the history of currency and the evolution of the international monetary system, we can see that precious metals, especially gold, have become the pioneers of human consensus—currency—due to their scarcity, divisibility, and ease of storage.

Entering the modern world currency system, in 1819, the United Kingdom established the gold standard, with the main responsibility of central banks being to maintain the official parity between currency and gold. After the two World Wars, the Bretton Woods system was established, managed by the International Monetary Fund, which further standardized and institutionalized the gold standard.

However, this system has a key problem: the dollar is linked to gold but also needs to become the world currency, leading to the "Triffin Dilemma". In 1976, the Bretton Woods system collapsed, the Jamaica system was established, and the dollar decoupled from gold, becoming the world reserve currency due to its hegemonic position.

Although the hegemony of the US dollar has promoted international trade and global economic development, it also faces inherent dilemmas. Over time, the relative power of the United States may weaken, and the practice of the dollar hegemony collecting seigniorage from the world is difficult to sustain. During the pandemic, this issue has further intensified, with government debt expanding without restraint. In addition, geopolitical issues are becoming increasingly prominent, and Russia's exclusion from the international payment system is an important sign of the significant trend of fragmentation in the monetary realm.

Nevertheless, the international monetary status of the US dollar is unlikely to be replaced in the short term. By the end of 2023, the United States still accounted for a quarter of the global economy, and the share of the dollar in global currency payments increased to 48%, while its share in international foreign exchange reserves remained at 59%. However, the seeds of change have already been sown, and the Jamaica system based on dollar hegemony is difficult to maintain in the long term under the new geopolitical landscape and technological development.

The future direction of the international monetary system is viewed differently by various parties. The World Bank has predicted three possibilities: the continuation of dollar hegemony, the coexistence of multiple currencies (such as the dollar, euro, and some Asian currency), or the full adoption of Special Drawing Rights (SDR). It currently seems that "de-dollarization" has become a consensus; it's just a matter of time. Events such as the COVID-19 pandemic and geopolitical conflicts are accelerating this process.

The "de-dollarization" process may suddenly accelerate in certain circumstances, such as the rapid fragmentation of global supply chains, escalation of geopolitical tensions, etc. This could lead to significant changes in the global division of labor and cooperation system, where security factors may take precedence over development in many cases.

As the hegemony of the US dollar gradually diminishes and global trade continues to develop, the most likely outcome is a diversified reserve currency system, primarily including the US dollar, euro, and Chinese yuan, with the British pound, Japanese yen, and SDR as supplements. There are also views suggesting that in the future, an "external currency" system supported by gold and other commodities may emerge, emphasizing the commodity value of real resources (especially energy) as the support for currency.

In this broader context, the financial market shows two trend-based trading directions: first, gold prices have deviated from the traditional real interest rate pricing logic; second, Bitcoin has broken free from the traditional risk asset pricing logic. These two asset classes may play an increasingly important role in the new international monetary system.