How would Bitcoin be affected by a return to the gold standard?
How would Bitcoin be affected by a return to the gold standard?

How would Bitcoin be affected by a return to the gold standard?

By Lorenzo Dalvit - 26 Apr 2020

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If The Gold Standard were to be reintroduced, Bitcoin would see its price stabilize, this is the answer to a rather bizarre question that was submitted to Andreas M. Antonopoulos.

The influencer then ventured further and talked about the effects of digital scarcity compared to the scarcity of gold.

Andreas Antonopoulos was born in London in 1972 and graduated in Computer Science and Data Communication and Distributed Systems at University College London. He is an educator who aims to bring as many people as possible closer to the opportunities represented by Bitcoin and all public blockchains (permissionless).

Very well known in the industry for having written first Mastering Bitcoin and then Mastering Ethereum, he holds several Ask Me Anything sessions on his YouTube channel.

“The probability of returning to Gold Standard is between 0 and 0.0001%”.

It would disrupt the public debt with a consequent crisis in international relations and trading models.  

“It is not even possible to imagine such a thing, because no nation has an interest in limiting its ability to issue debt”.

This, however, did not prevent him from using a hypothetical question to understand some important topics.

The Gold Standard and the Gold Exchange Standard

Before enjoying Antonopoulos’ answer, it should be pointed out that the monetary reference model linked to gold has changed over time, The Gold Standard model aims at a regime of fixed exchange rates determined by the gold reserves linked to each country issuing sovereign currency.

The Bretton Woods Agreement was different, which led to the Gold Exchange Standard, based on fixed exchange rates between currencies, all linked to the dollar, which in turn was linked to gold. 

The Bretton Woods agreements favoured a liberalist system, which requires, first and foremost, a market with minimum barriers. Unlike the system that preceded it (The Gold Standard), the mobility of capital was limited, because people were aware of the enormous weight it had in determining the crisis of 1929

All the agreements derived directly or indirectly from Bretton Woods did not provide for a correct control of the quantity of dollars issued, thus allowing the US to issue money uncontrollably, a fact contested several times by France and Germany because the US exported their inflation, thus impoverishing the rest of the world.

The effects of The Gold Standard on bitcoin 

The price of bitcoin could quickly stabilize because it would no longer have the appreciation due to the effects of continuous printing of currency followed by distrust of it and the inflationary effects.

Probably like the other coins, it would have to be priced in exchange for gold and no longer exchanged mainly for fiat.

The inflation of gold and bitcoin

An argument in favour of bitcoin, its controlled inflation is much safer than that of gold.

“In a hypothetical world where the standard was gold, we could see gold inflation increase thanks to space shipments”.

This statement is very extreme, but it serves to understand how there are factors not entirely controllable regarding the amount of gold existing on earth. Factors that have brought price shocks even in the past.

A killer application, that of Bitcoin against the devaluation of assets, this is how its blockchain is perceived today. Who knows what does the future hold.

Lorenzo Dalvit

Blockchain enthusiast tutor, expert in sales and marketing, social community manager, artistic director, musician, lover of disruptive paradigms and life. All my skill are about human interaction and connection

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