Gold Prices - 100 Year Historical Chart

Comparing Volatility of Bitcoin to Gold

Much has been written about the volatility of bitcoin as a reserve currency or stored value. It's hard to find a fair comparison because this is such a unique context. From reading a variety of posts, I investigated the volatility of gold after the US dollar dropped the gold standard. Below is a chart showing the last 100 years of gold prices. Many historical price charts use a logarithmic scale and show inflation adjusted numbers. These are NOT using a logarithmic scale. These are NOT inflation adjusted numbers. If we assume gold is the same physical commodity before and after 1971, this chart begs the question, what happened? Well, in 1971, Richard Nixon took the US dollar off the gold standard. Gold didn't change. The relationship between gold and the US dollar changed. Since the US dollar was, and is, a global reserve currency, by reference the relationship between gold and all currencies changed too.

Can Gold History Project Bitcoin Future Volatility

I absolutely agree that bitcoin is volitile. I believe it's a good stored value and medium of exchange, but it needs work before it can become a unit of account. By looking at just the volatility of this chart backwards, I expect it's just a matter of time before some digital currency becomes the new gold standard. If we see that going off a gold standard, introduces volatility, can we assume the opposite? Can we assume that going onto a gold standard will reduce volatility? I'm not proposing the US go back to using the gold standard...although there is much speculation that the idea is possibly on President Trump's agenda. If the gold standard of bitcoin is the underlying electricity required to mine it, then decreased volatility is just a function of time and liquidity.

Assumptions

If we make these assumptions, what would happen to the bitcoin price in US dollars?

• US dollar does not go back on the gold standard
• The bitcoin user base continues to grow at a nominal rate
• The bitcoin transaction volume continues to grow at a nominal rate
• Bitcoin transaction processing fees drop to less than 1% of credit card fees (i.e. Lightning network)
• Inflation in the US dollar continues to erode the purchasing power of the US dollar
• International business demands faster transaction speeds across countries

I'm excited to hear the variety of opinions. So, what do you think will happen in this specific scenario, and why? Can you use math to support your opinion?

References

• Why did the US leave the gold standard
  

How Nixon killed the US dollar

This is not financial advice.