How Money Relates to Value? An Empirical Examination on Gold, Silver and Bitcoin

The present work offers a review on two divergent schools of thought regarding the subject of money and highlights why understanding it is important to grasp the workings and nature of the concept of money. We adopt a spontaneous order perspective on social institutions, considering money as one. Such framework allows for the construction of axioms from which we formulate our problem allowing us to ask how old forms of money such as Gold and Silver hold up in today’s world regarding their hedging properties. Moreover, we also do so for Bitcoin since we consider it an appropriate asset due to its specific characteristics and its (at the time of writing) more than 10-year life span. We resort to the Autoregressive Distributed Lag (ARDL) methodology in order to study our three assets in the context of the US dollar and the US Economy for two different time periods. We analyse price dynamics from 1980 to 2020 for gold and silver resorting to annual data. Regarding bitcoin we employ quarterly data from 2009 to 2020. We conclude that the theories that explain what money is, how it comes to be so and how certain types of “money assets” may serve both as an indirect hedge against inflation in the two interpretations of the word and as a “stock of value” have merits that might deserve further investigation.

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