The Bitcoin Big Bang: How Alternative Currencies Are About to Change the World

Chapter 9 Investing and Trading in Alternative Currencies

With e-currency based on cryptographic proof, without the need to trust a third-party middleman, money can be secure and transactions effortless.

—Satoshi Nakamoto

In the summer of 1944, as war continued to devastate Europe, 730 delegates from the 44 allied nations gathered in the serene White Mountains of New Hampshire. The Bretton Woods Conference, so named because it was held at the Mount Washington Hotel in Bretton Woods, New Hampshire, was convened to design the global system of money after the end of World War II. This conference not only established the World Bank and the International Monetary Fund, it also created a global system of fixed foreign exchange rates. The U.S. dollar was deemed to be the global reserve currency, as it could be converted directly into gold. All other currencies were pegged to the U.S. dollar in order to give them stability.

In the relative calm of the postwar era, the Bretton Woods System was successful in maintaining global currency stability. The Marshall Plan allowed both Germany and Japan to rebuild and created tremendous demand for U.S. products and by extension the U.S. dollar. However, the success of the Bretton Woods System would be its downfall. As a result of U.S. dollar demand, the currency became overvalued and the United States became less competitive. In the spring of 1971, West Germany was the first country to leave the fixed exchange rate system and the value of the ...