Bitcoin and Gold Amid Global Capital Market Fluctuations: The Evolution of the New International Monetary System

Recently, the global Capital Market has experienced significant Fluctuation, with the appreciation of the yen triggering a reversal in carry trades, the VIX index soaring, and even gold experiencing slight adjustments due to some liquidity shocks. Bitcoin has also seen a sharp decline alongside risk assets. Although this seems to contradict the "dual" attribute theory, we still believe that as the new International Monetary System accelerates its evolution, the dual relationship between Bitcoin and gold will become even closer.

Looking back at the history of gold prices, since 1970, the price of gold against the US dollar has undergone three major rising cycles. The 1970s were a glorious period for gold, with prices increasing more than 17 times at their peak. This period coincided with the collapse of the Bretton Woods system, the decoupling of the US dollar from gold, along with two oil crises and geopolitical tensions, highlighting gold's value preservation and safe-haven properties.

After entering the 1980s, gold prices entered a consolidation phase, and in the 1990s, they even showed signs of weakening. This is related to the global inflation being brought under control and the economy regaining growth momentum. The first decade of the 21st century was the second round of the gold price increase cycle, with prices rising over 5 times at their peak. This increase was driven by factors such as the bursting of the internet bubble, rising inflation expectations after China's entry into the WTO, as well as the subprime mortgage crisis and the European debt crisis.

After 2010, with the US dollar resuming its appreciation cycle and the Federal Reserve reducing quantitative easing policies and starting to raise interest rates, gold entered a consolidation period again. Currently, it is in the third round of the upward cycle, which began in 2019, and so far, the price increase is close to 1 times. This round of the cycle can be divided into two phases: from the end of 2018 to early 2022, affected by escalating trade frictions and the pandemic, various countries adopted loose monetary policies; from 2022 to the present post-pandemic era, although the US has rapidly raised interest rates, gold prices have still risen by over 30%.

It is worth noting that traditional economics holds that the price of gold is negatively correlated with real interest rates, but this relationship seems to no longer hold in the post-pandemic era. Gold has emerged independent of real interest rates, with its value more reflected in "consensus." Central banks and the private sector worldwide are increasing their gold reserves, reflecting a defensive diversification against the dollar credit system.

Bitcoin and gold share many similarities, such as scarcity, decentralization, and forgery-resistance. With the SEC approving the first batch of Bitcoin ETFs to be listed in the United States, Bitcoin is further moving towards the mainstream. Recently, the positive correlation between Bitcoin and gold prices has significantly increased, suggesting that it may be evolving from a high-risk asset into a "commodity currency".

Looking to the future, the International Monetary System will enter a new phase. Before the new system is officially established, the trend of diversification of reserve currencies is obvious. The upward shift of the global inflation center and increased geopolitical uncertainty have kept gold in an upward cycle. It is noteworthy that the diversification of reserve currencies is not only occurring at the national level; the private sector is also experiencing this process. With the acceleration of Bitcoin's mainstream adoption, its value as a reserve currency is likely to keep pace with gold, both playing important roles in the new International Monetary System.