Author: Samuel Edyme, Bitcoinist; Translated by Baishui, Golden Finance
Fidelity Global Macro Director Jurrien Timmer recently commented on the debate over whether Bitcoin and gold are more reliable stores of value, outlining scenarios for whether each asset class could be a hedge against inflation, depending on the economic environment.
Theory of Money Supply and Asset Valuation
Timmer’s reasoning is based on the concept of “fiscal dominance,” whereby the government takes action to expand the money supply in a way that threatens the purchasing power of money. He notes that inflation is brewing, which is confirmed by the historical M2 money supply/CPI relationship.
A graph showing the money supply and inflation rate in the United States. Source: Jurrien Timmer on X
While Bitcoin and gold are arguably the most inflation-resistant assets according to theory, Timmer believes that this environment has not yet fully materialized, even after the Federal Reserve’s recent hawkish stance.
In addition, due to its love of volatility, Bitcoin is also called "digital gold", "gold 2.0" and "index gold" because on the one hand, Bitcoin has all the monetary characteristics that gold has. But according to Timmer, it is also a new Internet technology.
However, for Bitcoin to have and maintain its status as gold, the total amount of fiat money must continue to grow, and at a rate far above normal trends.
Timmer said that despite the recent surge in M2 money supply, the Federal Reserve’s tight monetary policy kept it short-lived, suggesting that gold and Bitcoin may not yet be an absolute store of value.
Currently, the price of Bitcoin has surged to $69,523 after the latest CPI report showed a slowdown in inflation, which could indicate a strengthening of its status as a store of value.
BTC price is moving sideways on the 4-hour chart. Source: BTC/USDT on TradingView.com
The report also had a positive impact on the price of gold, which has risen by 0.91% in the past 24 hours and is currently trading at $2,336.
The impact of Treasury yield correlation on Bitcoin
Meanwhile, Bitcoin (BTC) price has lost correlation with the 10-year U.S. Treasury (UST) yield, with the correlation falling to its lowest level in the past 14 years at -53, according to the latest data reported by Barchart.
Correlation of Bitcoin (BTC) and 10-year U.S. Treasury (UST) yield. Source: BarChart on X
This shows that BTC is currently developing independently and the market is not affected by traditional fiscal instruments such as US Treasury yields. This indicator determines the rate of return investors get in government securities.
This could indicate that Bitcoin is becoming more loosely tied to the traditional financial system, which could be the beginning of its evolution into its own unique asset class.
If Bitcoin continues to decouple from these traditional financial indicators, it could greatly enhance its viability as a better non-traditional hedge against fiscal instability.
However, Timmer acknowledged that the common limitations of Bitcoin and gold as a store of value are based on economic conditions that have yet to emerge, particularly in terms of money supply and inflation.
