Fidelity’s Global Macro Director Jurrien Timmer suggested in a recent discussion that Bitcoin (BTC) could be considered a form of “exponential gold,” potentially surpassing the performance of traditional gold during periods of high inflation. Timmer emphasized that Bitcoin’s risk-return profile exists in a distinct realm when compared to conventional asset classes such as gold, stocks, or treasury bonds.
He stated, “In my perspective, Bitcoin can be seen as a commodity-based currency striving to serve as a store of value and a safeguard against monetary devaluation. I envision it as a version of exponential gold.”
While acknowledging gold’s role as a form of “money,” Timmer argued that it is “too deflationary and cumbersome for use as a medium of exchange.” Nonetheless, gold has historically gained market share relative to GDP during times of significant monetary expansion, as seen in the 1970s and 2000s.
Prominent hedge fund managers who are bullish on Bitcoin, including Paul Tudor Jones and BlackRock’s Larry Fink, have frequently drawn parallels between Bitcoin and “digital gold” due to its dependable scarcity compared to fiat currencies like the US dollar.
During the Federal Reserve’s interest rate reduction in 2020, both Bitcoin and gold reached new all-time highs within months. They also experienced notable pullbacks in 2022 as interest rates rose, but both assets have made remarkable recoveries since then.
One key distinction between the two assets is their volatility, with Bitcoin exhibiting approximately four times the volatility of gold. Timmer argued that Bitcoin’s high volatility is sometimes criticized, but it also presents significant opportunities for gains. He highlighted that Bitcoin is down 54% from its two-year high but has also risen by 84% from its low, a risk-reward dynamic that government bonds cannot match.
In contrast, gold is currently trading 1% below its two-year high and is up 22% from its two-year low, with a price of $1978 per ounce.
Timmer also pointed out that Bitcoin remains uncorrelated to gold, despite some similarities in trading patterns this year. Instead, it retains a substantial (though decreasing) correlation with the S&P 500 while showing a negative correlation with the US dollar and US Treasuries.
He concluded by suggesting that Bitcoin and gold may not be “playing for the same team” but rather participating in different financial games, indicating that this divergence is not necessarily a negative development.