The Evolution of Currency Systems and the Potential of Bitcoin

Since 2022, the correlation between Bitcoin and gold prices has significantly increased, closely related to the unfolding of the "post-pandemic" new era. This article will explore why, in the "post-pandemic" era, Bitcoin has the potential to participate in the major transformation of the international monetary system. The core argument is that the transformation of the current international monetary system will unprecedentedly accelerate Bitcoin's "gold" properties, and the value of Bitcoin as a reserve currency will enter the mainstream view more quickly.

Looking back at the history of currency and the development of the international monetary system, precious metals, especially gold, have become the pioneering consensus of humanity – currency – due to their scarcity, divisibility, and ease of storage. In modern times, the United Kingdom established the gold standard in 1819, with central banks responsible for maintaining the official parity of their currencies with gold. The Bretton Woods system established after World War II further regulated and institutionalized the gold standard.

However, there is an inherent contradiction in the dollar being linked to gold and becoming the world's currency, known as the "Triffin dilemma." In 1976, the Bretton Woods system collapsed, the Jamaican system was established, and after the dollar decoupled from gold, it became the world standard currency through "hegemony." Dollar hegemony has driven international trade and the global economy, but it also faces inherent dilemmas. The strength of the United States cannot remain forever strong, and the dollar hegemony, through collecting seigniorage from the world, has led to a continuous expansion of trade deficits and fiscal deficits, a problem that worsened during the pandemic.

Nevertheless, the international monetary status of the US dollar is difficult to replace in the short term. By the end of 2023, the United States still accounted for a quarter of the global economy, with the dollar's share of global currency payments rising to 48% and its share of international foreign exchange reserves reaching 59%. However, the trend of change has already emerged, and the Jamaica system based on the dollar's hegemony is difficult to sustain under the new geopolitical landscape and technological development.

The form of the future international monetary system remains uncertain. The World Bank has predicted three possibilities: the continuation of the dollar hegemony, a multipolar currency system, or the use of SDR (Special Drawing Rights). Currently, "de-dollarization" has become a consensus; it's just a matter of time. The COVID-19 pandemic, geopolitical conflicts, and political changes are all accelerating this process.

"De-dollarization" may accelerate in several scenarios: first, the division of industrial chains intensifies, challenging the global industrial division of labor and cooperation system; second, the geopolitical landscape becomes more complex, potentially forming new group confrontations or multipolar balances.

As the hegemony of the US dollar gradually weakens, global trade continues to develop, and a multi-currency reserve system is most likely to form, dominated by the US dollar, euro, and Chinese yuan, supplemented by the British pound, Japanese yen, and SDR. Low-probability events such as large-scale conflicts may lead to a temporary return of the currency system to the gold standard. Another viewpoint suggests that in the future, an "external currency" system supported by gold and other commodities may emerge.

Regardless of how the currency system evolves in the future, the trend of de-dollarization has clearly accelerated in the post-pandemic era. This is reflected in the financial markets as two trends: the price of gold rising outside the traditional real interest rate pricing logic, and Bitcoin strengthening beyond the traditional risk asset pricing logic. These two trends are worth further exploration.