Analysis of Bitcoin and Gold as Stores of Value

In the ongoing debate between Bitcoin and gold as superior stores of value, Jurrien Timmer, Director of Global Macro at Fidelity, offers a fresh perspective. Both assets are commonly seen as hedges against fiscal dominance, where governments devalue money through increased money supply. Timmer argues that this concept is valid, as continual money supply growth often leads to inflation. The correlation is evident when examining the M2 money supply growth and consumer price index.

Timmer emphasizes that sustained above-trend growth in monetary aggregates is crucial for Bitcoin and gold to establish themselves as reliable stores of value. Despite expectations, this growth has not materialized. The surge in real money supply during the pandemic was swiftly reversed by the Federal Reserve’s policy adjustments, indicating that the conditions required for Bitcoin to challenge gold haven't yet been met.

Timmer rejects the idea of cryptocurrency as "gold 2.0" and instead coins the term "exponential gold" to highlight its combination of monetary features with advanced network technology.

Bitcoin versus Gold

The speculation that Bitcoin could surpass gold in market capitalization has been ongoing since the cryptocurrency's inception. The introduction of spot Bitcoin ETFs has fueled this debate, allowing a broader audience to invest in the cryptocurrency.

Gold currently holds a market cap exceeding $15.6 trillion, while Bitcoin's market cap sits around $1.33 trillion. To match gold's market cap, Bitcoin would need to appreciate by 11.72 times, reaching an approximate price of nearly $790,000 per BTC.