Reform of the Monetary System and New Opportunities for Bitcoin

Since 2022, the correlation between Bitcoin and gold prices has significantly increased, coinciding with the arrival of the "post-pandemic" new era. In this new phase, Bitcoin is expected to genuinely participate in the significant transformation of the international monetary system. This round of changes in the international monetary system will unprecedentedly enhance Bitcoin's "gold" attributes, allowing its reserve currency value to enter the mainstream view more rapidly.

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. The monetary system of the modern world has undergone multiple changes, from the gold standard established by the UK in 1819, to the Bretton Woods system after the two World Wars, and finally to the establishment of the Jamaica system in 1976, where the US dollar ultimately decoupled from gold and, leveraging its "hegemonic" status, became the world reserve currency.

However, the dollar hegemony system also faces inherent dilemmas. The strength of the United States cannot remain strong forever, and the practice of the dollar hegemony collecting seigniorage from the world is akin to a drug, making this huge economy difficult to extricate itself. The trade deficit and fiscal deficit continue to expand, and this problem has accelerated during the pandemic. In addition, the prominence of geopolitical issues, such as Russia being excluded from the SWIFT system, marks the emergence of a "singularity" in the trend of major divergence in the currency field.

Nevertheless, the international monetary status of the US dollar remains irreplaceable 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 increasing to 48%, and its share in international foreign exchange reserves still reaching 59%. However, the seeds of change have been sown, and the Jamaica system based on dollar hegemony is difficult to maintain in the new geopolitical landscape and technological development trends.

The future international monetary system may present a diversified pattern. "De-dollarization" has become a consensus; it is only a matter of time before quantitative change leads to qualitative change. Events such as the COVID-19 pandemic and geopolitical conflicts are accelerating this process. The most likely scenario is the formation of a diversified reserve currency system dominated by the US dollar, euro, and renminbi, with the British pound, Japanese yen, and special drawing rights ( SDR ) serving as supplements.

In this context, the financial market presents two trend-based trading directions: first, gold has broken free from the traditional real interest rate pricing logic, and its price continues to rise; second, Bitcoin has deviated from the traditional risk asset pricing logic, showing strong upward momentum. These two trends reflect investors' expectations for reforms in the traditional currency system and the demand for new types of store of value assets.

As the international monetary system evolves, Bitcoin, as a decentralized digital asset, may further enhance its position in the global financial landscape. It is not only an investment tool but could also become an important component of a diversified currency system in the future. The limited supply, global liquidity, and tamper-proof characteristics of Bitcoin exhibit qualities similar to digital gold in certain aspects.

However, for Bitcoin to truly become a globally recognized reserve asset, it still faces many challenges. Regulatory uncertainty, price volatility, and energy consumption issues all need to be addressed. Nonetheless, in the context of significant changes facing the current monetary system, Bitcoin undoubtedly provides us with a completely new direction for thought.

How the future international monetary system will evolve remains an open question. However, it is certain that with the acceleration of the process of dedollarization, the traditional monetary system is facing unprecedented challenges and opportunities. In this era full of uncertainty, closely monitoring the development of emerging assets such as Bitcoin and their roles in the global financial landscape will become increasingly important.