Standard Digital Assets: Gold
Gold is a Standard Asset
Used as the main currency in many countries well before the introduction of paper money, and dates back to the emergence of human civilizations, gold was a staple in monetary utilization for our developing societies. After thousands of years using physical gold as currency, countries decided to transition to paper money.
Paper money currencies still maintained an explicit link to gold, the paper being exchangeable for gold on demand, being first adopted by Great Britain, then followed by the United States and many others. The first hiccup with the “Gold Standard” was during World War I, many countries fell off of it to keep up with war time spending, and expand their monetary supply leading to economic uneasiness.
Monetary turbulence finally settled in the world’s economies after World War II when the Bretton Woods Agreement of 1944 established the gold standard based U.S. dollar as the underlying currency to which 44 other countries pegged their currencies. This system remained in place until 1971, when the U.S. Dollar was officially taken off the gold standard and rendered a fiat currency: government issued money with no intrinsic value, being backed by nothing.
Since the switch to a fiat monetary system, the U.S. Dollar has lost over 97% of its value (shown in the figure below) in comparison to the current value of gold. One ounce of gold, worth $38 in 1971, is today worth more than $1700. Already you can start to see why gold is such an important asset and will continue to be one of the best and safest assets in the world.
But, when it comes to StandardDAO deeming gold as a Standard Digital Asset, we have to check the boxes of what makes an asset a Standard.
First, has gold proven its resiliency by showing staying power through bull and bear cycles?
In traditional bear markets we see the majority of assets plummet, many firms turn to commodities as stores of value in these downward trajectories. In the 2008 financial crisis, stocks fell a staggering 40%+ while gold not only maintained its value, but increased in value as capital flowed into more stable and secure assets. This is a trend that has happened time and time again which is why gold is considered to be a hedge. The chart below shows the price of gold (gold) in comparison to the DJIA (blue).
This notes that gold maintains its value much greater in times of market crashes and proves its resiliency and staying power.
Does gold show to be the top asset in its given vertical by utility and/or market cap?
There is no doubt that gold is the winner in this case. The current market cap of gold is $10.054 T over the next closest precious metal, silver. Gold has dominated the precious metal industry for years and is one of the most prominent and important assets of all time. With gold also being absolutely vital as a conductor in many microchip technologies, its utility is also as essential to innovation now more so than ever in history. While it is not completely deflationary like Bitcoin, the demand for this precious metal still outpaces supply mined across the planet.
Lastly, has gold shown consistent growth and adoption over time?
The short answer is yes. Despite the evolving dynamics seen in the cycle of the world’s economies, gold has become an individual asset class featured in investor portfolios all over the world as a long-term investment and will continue to do so.
The figure above shows the consistent growth and adoption of gold, even in times of market despair. There is far more history of price action when it comes to gold compared to digital asset markets. What is clear in this chart is a growth cycle that has taken decades to form which is happening inversely of the inflation of the U.S. Dollar during that time.
So, is gold a Standard Digital Asset?
If you read through the article it should be clear that gold meets all of the qualifications of a Standard Digital Asset. Its staying power and resiliency, being the top asset in its vertical, and showing consistent growth and adoption has been proven for longer than almost any asset class in the world. Having one of the safest and most consistent growing assets in our treasury prepares us for security and growth for the long haul regardless of market conditions.
StandardDAO is a true store of value backed by a basket of Standard Assets. With this backing of the strongest real world and digital assets, Standard delivers sustainable yields and growth over assets that are not backed in such a way. Join the conversation below.
Risks and Disclaimers
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