Bitcoin and Gold: Currency System Reforms in the Post-Pandemic Era

Since 2022, the correlation between Bitcoin and gold prices has significantly increased, a phenomenon closely related to the unfolding of the "post-pandemic" new era. In this context, Bitcoin has the potential to participate in significant changes in the international monetary system. This round of changes in the international monetary system will unprecedentedly accelerate the deepening of Bitcoin's "gold" attributes, allowing its reserve currency value to enter the mainstream consciousness more quickly.

Looking back at the history of currency and the development of the international monetary system, precious metals, especially gold, have become the pioneers of human consensus—currency—due to their scarcity, divisibility, and ease of storage. In 1819, the UK established the gold standard, and the main responsibility of central banks was to maintain the official parity between their currency and gold. After the two World Wars, the Bretton Woods system was established, regulated and managed by the International Monetary Fund, making the gold standard more standardized.

However, when the US dollar was linked to gold and became the world currency, it faced the "Triffin Dilemma": economic development requires an increase in the money supply, but this can lead to currency devaluation; maintaining the stability of the dollar requires keeping the balance of international payments, which does not allow for an increase in the money supply. In 1976, the Bretton Woods system collapsed, and the Jamaica system was established, which led to the decoupling of the dollar from gold, allowing it to become the world reserve currency through "hegemony."

The hegemony of the US dollar has driven international trade and global economic development, but it also faces inherent dilemmas. The strength of the United States cannot remain forever robust, and the practice of levying seigniorage on a global scale makes this massive system difficult to extricate itself from. The trade deficit and fiscal deficit continue to widen, and this issue has worsened during the pandemic, with government debt expanding unchecked. Furthermore, geopolitical issues are becoming increasingly prominent, with Russia being excluded from the SWIFT system, marking a "singularity" in the trend of significant differentiation in the currency domain.

Nevertheless, the international monetary status of the US dollar remains irreplaceable in the short term. By the end of 2023, the United States accounts for a quarter of the global economy, the dollar's share in global currency payments has increased to 48%, and its share in international foreign exchange reserves stands at 59%. However, the seeds of change have already been sown, and the Jamaica system based on dollar hegemony is difficult to sustain under the new geopolitical landscape and technological development trends.

Regarding the future forms of the international monetary system, the World Bank predicted three possibilities in 2011: the continuation of the dollar hegemony, the coexistence of the dollar, euro, and some Asian currency, or the full use of SDR (Special Drawing Rights). Currently, "de-dollarization" has become a consensus, and events such as the COVID-19 pandemic and geopolitical conflicts are accelerating this process.

The "de-dollarization" process may suddenly accelerate in certain circumstances. First, the acceleration of the division of the industrial chain may reverse the global industrial division of labor and cooperation system, with security considerations possibly taking precedence over development. Second, geopolitical factors, including various regional conflicts and the complexity of relations among major powers, may lead to the emergence of a "new cold war" situation.

As the dominance of the US dollar gradually diminishes and global trade continues to develop, the most likely scenario is the formation of a diversified reserve currency system dominated by the US dollar, euro, and renminbi, with the pound, yen, and SDR serving as supplements. Another viewpoint suggests that a "foreign currency" system supported by gold and other commodities may emerge in the future, emphasizing the commodity value of real resources (especially energy) as the backing for currency.

In this context, the financial market may exhibit two trending trading directions: one is that the price of gold rises, deviating from the traditional real interest rate pricing logic; the other is that Bitcoin continues to appreciate, breaking away from the traditional risk asset pricing logic. Both trends reflect the market's expectations and responses to future changes in the monetary system.