Gold in the 1970s is Bitcoin now – a historical analogy by Fred Krueger and, in his view, a key to understanding potential future dynamics. The comparison deserves attention, as many overlapping aspects are hard to ignore. However, physical and digital gold aren’t the same thing, so while the analogy may be highly relevant, it calls for more nuanced evaluation and clarification.
What Are the Strengths and Weaknesses of Fred Krueger’s Analogy Between Gold and Bitcoin?
Let’s begin with the fact that Fred Krueger is a respected mathematician, which gives his position considerable credibility – and I would approach it with respect. Recently, he published an interesting post suggesting that the price dynamics of gold in the 1970s could serve as a key to understanding the potential behavior of digital gold – Bitcoin.
Specifically, Krueger recalled that in the early 1970s, gold was priced at $35 per ounce, and by 1980 it had reached $615. In his view, this is a classic example of how investors begin to exit the centralized financial system during periods of macroeconomic uncertainty.
“If you want to understand where Bitcoin is going in the next decade, just look at Gold prices in the 1970s. Almost the exact same setup. We started at $35 an ounce and ended at $615. This is the pattern when people want ‘out’ of the financial system.”
This is a fair point – both assets are far more decentralized and self-sovereign, not being subject to centralized control at their core.
Krueger then points to parallels in the totality of political, economic, and social factors. In the 1960s, there was widespread optimism – the “Go-Go Sixties,” the “Nifty Fifty,” and other manifestations of stock market euphoria. Then came a shift in sentiment, a crisis of confidence, inflation, political instability, and escalating conflict.
“In both cases we went from ‘everything is amazing’ to ‘everything is crap’ in a decade. Remember the ‘GoGo Sixties’? ‘The Nifty Fifty’? Xerox? Polaroid? Mini Skirts? Then, shortly afterwards… Jimmy Carter, OPEC, The Russians invading Afghanistan, threat of WW3, High interest rates? Perfect analogy.”
Yes – today we see many similar factors, even if the players and regions are different. And aside from gold, we have yet to come up with a deflationary and decentralized mechanism – except perhaps Bitcoin, which fits the same criteria and arguably offers more than classical gold.
Wondering where to trade Bitcoin and other cryptocurrency safely and beneficially? For readers exploring new exchanges, WEEX is currently offering early users a chance to claim up to 100 USDT just for signing up and verifying – no strings attached.
Still, there are several factors to keep in mind to ensure this analogy doesn’t lead us astray:
- Yes, gold was a self-sovereign asset that could be used in a decentralized manner. But at the same time, it was already a global reserve asset. Moreover, although the Bretton Woods system ended in 1971, the rise in gold’s price was largely driven by its global reallocation. Institutional recognition of Bitcoin, by contrast, is an ongoing process and subject to a range of scenarios that will undoubtedly influence its dynamics.
- In the 1970s, the regulation of gold in the U.S. was liberalized – as private ownership of investment gold was prohibited until 1975. Bitcoin today is undergoing a process of regulatory approval in the U.S., but is also facing tightening restrictions in other key jurisdictions.
- Gold traded on highly liquid markets and had a global infrastructure long before the 1970s. Bitcoin’s infrastructure, by contrast, remains fragmented across CEXs, DEXs, custodians, and diverse legal frameworks that each require different forms of compliance.
- In the 1970s, gold’s rise occurred in an environment of high inflation, a weak dollar, and negative real interest rates. Bitcoin has yet to demonstrate a clear correlation with such variables. For example, in 2022, during a period of high inflation and rising interest rates, BTC declined – unlike gold, which showed growth under similar conditions (1974–1979).
In other words, some of Bitcoin’s growth drivers may overlap with gold – and some may not. Bitcoin may also have entirely new drivers that don’t apply to gold, given that it is a physical asset that is far less scalable, portable, or usable in digital environments and transactions.
If we observe a world rapidly transforming and digitizing – becoming less private and more centralized – then Bitcoin may prove far more applicable than gold, and its potential growth dynamics may be significantly better.
Conclusion
Bitcoin may not exhibit the same kind of growth gold saw under similar conditions – but it could demonstrate a growth gold never experienced under different ones. Therefore, I wouldn’t call this analogy perfect, but rather comparable and useful – if you aren’t oversimplifying it.
