By Matt Hougan
The most compelling use case for Bitcoin today is as a store of value. But too often, people dismiss the idea because of Bitcoin’s volatility.
How can it be a store of value when its price moves 20% in a month?
Gold is solid. Bitcoin is volatile. It’ll never work.
These statements are ignorant of gold’s history and devoid of imagination.
What the History of Gold Teaches Us
The 1970s are a dividing line for gold. Before 1971, the U.S. dollar was hard-backed by gold, and gold’s value was effectively vouchsafed by the full faith and credit of our government.
When Richard Nixon took the U.S. off of the gold standard in 1971, it set gold loose from its moorings. What followed was a period of huge volatility, as gold fought to establish itself as an independent store of wealth. In 1974, for instance, gold bullion prices rose 73%, before falling 24% in 1975. In 1981, gold lost 33% of its value, after being up 121% just two years prior.