The crypto market community considers bitcoin a hedge against inflation and a better store of value than fiat currencies.
The top cryptocurrency, however, might not be so attractive if central authorities ever reverted to the gold standard – a monetary system where a country's currency or paper money has a value directly linked to gold.
This is because the inflation rate tends to remain largely stable over the long run under the gold standard.
As seen above (left), consumer prices in the UK during the classical gold standard, which operated between 1815 and 1914, showed remarkable stability.
Put simply, under the gold standard, a $50 steak dinner would cost about the same ten years later.
On the other hand, under the fiat monetary system, prices tend to rise over time, as seen above (right). For instance, the US inflation rate has averaged 1.8 percent over the last ten years.
At that rate, a steak dinner costing $50 today would cost about $50.90 a year from now.
Put another way, under a fiat monetary system, a currency's purchasing power erodes over time.
By contrast, bitcoin is designed to retain its purchasing power, minimizing inflation. The cryptocurrency undergoes mining-reward halving every four years, a process designed to curb inflation by slowing the issuance of new supply. This explains its appeal as a store of value under the fiat system.
However, under a gold standard, the purchasing power of the fiat currency remains more or less stable over the long run. As a result, bitcoin, despite its deflationary policy, may receive little or no love as a store of value.
It's not that there can't be instances of short-term price volatility under a gold standard: In 1847, the general level of consumer prices in the UK rose by 7% only to fall by 14% the following year, according to bullionstar.com. But it's unclear how bitcoin would react under such a scenario. |
 
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Return of Bull Market Indicator
BTC: Price: $7,300 | Market cap: $132.25 Billion | 24-Hr Volume: $15.40 Billion
Trend: Bullish Bitcoin fell 1.4 percent on Monday, confirming a three-day losing streak. The cryptocurrency has erased more than 45 percent of the last week's rally.
Even so, the short-term bias remains bullish with long wicks attached to the previous two daily candles signaling a rejection of lower prices or lack of conviction among sellers.
Further, the daily chart MACD histogram has crossed above zero, confirming a short-term bullish reversal. The bullish hammer reversal pattern confirmed on the three-day chart last week is also valid with prices holding well above $6,847.
All-in, bitcoin looks set to retest a falling trendline support at $7,600. A violation there would expose the recent high of $7,870. A break below $6,847 would weaken the bullish case.
Long-term trend: Neutral
Bitcoin has found acceptance below the 50-week MA – a cause of concern for the bulls. Historically, the cryptocurrency has suffered deeper losses after falling below the key average.
Even so, the outlook remains neutral, as the miners’ reward halving, usually a price-bullish event, is due in May 2020.
With BTC looking oversold on the daily chart, a notable recovery ahead of the supply-cutting event can’t be ruled out – more so, as the 50-week MA looks set to cross above the 100-week MA next week. That would be the first bullish crossover in over three years.
Its worth noting that the previous bull cross had marked the start of a long-term bull market. The cryptocurrency picked up a strong bid near $430 following the bull cross confirmation in May 2016 and charted its way to a record high around $20,000 in December 2017.
That said, the outlook as per the weekly chart would turn bullish only if and when prices break higher from the five-month long bearish channel.
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DigixDAO's love affair with 200-day MA continues MAID: Price: $18.80 | MCAP: $37 million | 24-Hr Volume: $1 million
Short-term trend: Bullish DigixDAO, the 94th largest digital asset by market capitalization, is currently reporting an 8 percent gain on a 24-hour basis.
The cryptocurrency jumped 36 percent on Nov. 29, confirming an upside break of the trendline sloping downwards from May highs.
The outlook, therefore,is bullish. So far, however, DGD has failed to close above the 200-day MA, currently at $19.67. A UTC close higher would bolster the bullish setup and open the doors for $26.40 (Aug. 9 high).
The bullish outlook would be neutralized if and when prices drop below the higher low of $18.50 created on Dec. 2. Long-term trend: Bullish
DGD is looking north, having confirmed a bullish divergence of the relative strength index with a 66 percent rise last week. The bull case would strengthen further once prices rise above $20.
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| | | Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. |
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Bitcoin Under Gold Standard