Jurrien Timmer, a Director of Global Macro, says, ‘Bitcoin is just getting started.’ As the Bitcoin versus gold debate on which one is a better store of value continues, Timmer has brought essential insights to light. From the analysis made by Timmer, both assets are considered as the hedge against fiscal dominance, a situation where the government undermines the price level by expanding the money stock. He believes this thesis is well grounded on empirical evidence and that a permanent rise in the money supply results in inflation. This relationship can be seen when a 10-year moving average of the M2 money supply growth rate is plotted with the inflation rate as measured by the consumer price index.
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Timmer states that only if monetary aggregates continue to grow above-trend Bitcoin and gold can they be secure in their new positions as stores of value. However, he comments that this has yet to happen. The figures for the increase in actual money mass in the US rose drastically during the pandemic period and sharply decreased with the actions of the Federal Reserve. This indicates that the expected standard that may accrue to make bitcoins a competitive substitute for gold has yet to be attained.
Bitcoin vs. Gold
When categorizing the cryptocurrency, Timmer rejects the term’ gold 2.0′ as unrepresentative of the asset because it has broader uses than merely being a monetary currency; he dubs it the ‘exponential gold.’ This conversation that Bitcoin might someday surpass gold as the asset of preference in market capitalization is not new. This has been a debate in the community since Bitcoin was made available. This is particularly true with spot Bitcoin ETFs, as millions can trade directly through the conventional method.
At present, gold as an asset is valued at more than $15 trillion in the global marketplace. Bitcoin’s market capitalization is around $1.33 trillion. Bitcoin would need to rise by 11.72 times in market cap to match gold’s market value, reaching an estimated price of nearly $790,000. Although this scenario may seem optimistic, some believe Bitcoin has the potential to achieve such growth and become increasingly popular in the future.
The entry of Bitcoin ETFs into the market suggests the beginning of a new era for cryptocurrency. These financial products appeal to conventional investors, creating a correlation between traditional and digital finance. Consequently, Bitcoin and other cryptocurrencies could become mainstream assets if investors and institutions continue to flood the space.
Timmer’s insights provide a comprehensive overview of the potential for Bitcoin and gold as stores of value in the future. Although Bitcoin has yet to cement its position in this capacity, its trajectory suggests it is determined to ascend to that role. The competition between Bitcoin and gold will likely remain central to financial investment and market dynamics.
This development adds a significant dimension to the Bitcoin versus gold debate, highlighting the transformative impact of digital assets. As such, market observers and investors will closely monitor these trends, anticipating the next significant movement within the financial market.
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