The Dual Relationship Between Bitcoin and Gold: The Rise of the New International Monetary System

Recently, global capital markets have experienced significant volatility, with various factors leading to a sharp decline in risk assets, and Bitcoin has not been spared. However, this short-term phenomenon does not alter the long-term trend of the accelerating establishment of the dual relationship between Bitcoin and gold. The evolution of the new International Monetary System is driving this process.

Looking back at the history of gold prices, there have been three major upward cycles since 1970. The 1970s were the true "golden age", with the collapse of the Bretton Woods system and the oil crisis driving gold prices to soar. From the 1980s to the 1990s, as inflation was brought under control and economic growth resumed, gold prices entered a consolidation and decline phase.

The second round of the bull market at the beginning of the 21st century was related to the burst of the internet bubble, China's accession to the WTO, and the global financial crisis. Central banks around the world engaged in large-scale money printing, and the decline in real interest rates increased the attractiveness of gold. After 2010, the strengthening of the dollar and the tightening of policies by the Federal Reserve led to another consolidation period for gold.

We are currently in the third round of the upward cycle, which began in 2019. This round of increase can be divided into two phases: from the end of 2018 to early 2022, influenced by geopolitical tensions and the pandemic; from 2022 to the present, despite rising real interest rates, gold prices continue to climb.

Traditional economics believes that the price of gold is negatively correlated with real interest rates, but recently this relationship seems no longer valid. The price of gold has detached from the pricing framework of real interest rates, reflecting feedback during the transition period of the new International Monetary System, and essentially strengthening the 'consensus' on the monetary attributes of gold.

Central banks and private investors around the world are increasing their gold holdings to diversify against dollar risk. This trend is particularly evident in non-Western countries, reflecting the differentiation and evolution of the International Monetary System.

Bitcoin shares many similarities with gold, such as scarcity, decentralization, and forgery resistance. With the SEC approving Bitcoin ETFs, Bitcoin is accelerating towards the mainstream. Over the past few years, Bitcoin has been highly correlated with the Nasdaq index, but recently its correlation with gold has significantly increased, suggesting that it is transitioning to a "commodity coin."

The future International Monetary System will enter a new stage, with the diversification of reserve currencies becoming a trend. Against the backdrop of rising inflation rates and increasing geopolitical uncertainties, gold remains in an upward cycle. It is worth noting that the diversification of reserve currencies is not only occurring at the national level, but the private sector is also experiencing this process. The mainstreaming of Bitcoin is accelerating, and its value as a reserve currency is likely to rise alongside gold.