Gold has been on an absolute tear over the past two years, doubling from $2000 to more than $4000 per ounce, surpassing a $30 trillion dollar market capitalization earlier this week.

Even though gold experienced significant bull-runs throughout the late 70s and the mid-2000s, this most recent price surge is unprecedented from the perspective of a historical price chart:

The chart may remind you of the hyperinflation Weimar Germany experienced in the early 1920s, signalling that something is very, very wrong. The near-vertical price spike could be indicative of two things:

• Investors are quickly waking up to the unsustainable nature of the debt-based fiat system, or they have been tipped off that we've finally reached the breaking point.
• The powers that be are prepared to let the financial system collapse, after years of keeping the price of gold artificially suppressed.

If a currency crisis and debt reset are in the cards, will gold be the basis of a new financial system (as it was before 1971), or will we see the advent of some other form of money?

Gold's Limitations

The problem with gold has always been counterparty risk.

In recent decades, most investors have been buying "paper gold" - physical gold represented by ETF shares, certificates, stocks, etc. Very few people are holding physical gold in a personal safe at home.

At the end of the day, in a "Shit Hits The Fan" (SHTF) scenario, will financial institutions be able to make everyone whole when physical gold is demanded?

The Great Taking by David Rogers Webb explains how bank account deposits, ETFs, and gold certificates do not actually belong to the holder, but are rather leased to them though a convoluted financial system.

The reality is that assets could be confiscated in a SHTF scenario, pushing the people further into a world where they will "own nothing, and be happy".

Eroding Confidence

Trust in the financial system has been eroding for decades now, especially since the 2008 financial crisis, and even more so since 2020 when banks started to make cash withdrawals increasingly difficult.

The next financial crisis could completely destroy confidence in traditional institutions.

In such a scenario, would the people find a way to trust the new custodians of their assets, considering how the previous ones betrayed them?

Enter Trustless Money

If a "Great Taking" scenario were to unfold, the traditional banking system would experience wave after wave of restructuring and asset confiscation.

Meanwhile, self-custody Bitcoin and crypto holders would retain control of their assets, as properly decentralized cryptocurrencies cannot be altered or confiscated by governments, banks, or corporations.

As trust breaks down in traditional finance, more and more people would turn to trustless blockchains such as Bitcoin, Ethereum, and more, ensuring their balances cannot be manipulated by a third-party.

This would eventually result in a paradigm shift in the way we think about money.

Many people still laugh at this "magical Internet money", especially when considering it as an alternative form of money when the financial system is stressed.

That said, just as it took time for the population to accept paper notes, and then plastic cards as money, it will also take time for the people to accept cryptocurrencies as money as well.

Holding On

Instead of a fruitful 2025 to finish off the typical four year cycle, Bitcoin has been correcting, and the rest of the cryptocurrency market has been in shambles, especially after the greatest liquidation event in crypto history occurred last week.

Only the true believers have been holding on through this demoralizing carnage, convinced that eventually the people will see the advantages of cryptocurrencies over confiscatable debt-based fiat currency and paper gold.

Until next time...

As confidence breaks down in the traditional system, the people will start to appreciate the trustless nature of Bitcoin and other cryptocurrencies.

Those who continue to pay attention and hold on through the panic selling will either be rewarded, or their wealth will be completely wiped out. Those are the risks involved with betting on a new, decentralized financial system.

If you found this article interesting, be sure to check out my other posts on crypto and finance here on the Hive blockchain. You can also follow me on InLeo for more frequent updates.

Further Reading

- Who Does The World Owe $315 Trillion Dollars To?
- Could This Stock Market Crash Usher In CBDCs?