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To investors,
Fidelity manages over $11 trillion in assets. They are one of the titans of the traditional financial system. When their team shares an opinion publicly, people around the world pay attention.
This is why it is so interesting to take a look at recent comments by Jurrien Timmer, Director of Global Macro at Fidelity, who has been tracking bitcoin’s rise over the last 3-4 years and periodically updates his perspective.
Timmer tweeted that bitcoin’s current price rise is in-line with past bull markets, which is objectively true. But that is not the interesting part of his analysis.
He followed this chart with the following paragraph:
“In my view, Bitcoin is a commodity currency that aspires to be a store of value and a hedge against monetary debasement. I think of it as exponential gold.”
This is the first time that I have heard someone use the phrase “exponential gold.” It is a perfect way to describe bitcoin though. The digital currency embodies the sound money principles of gold (outside the system and can not be debased), while benefiting from the asymmetry of new technology adoption.
Downside protection of gold, upside of tech stocks—exponential gold. Truly an unique asset.
Timmer followed this comment with two more charts. The first shows purchasing power trends for various assets from 1900 till today. He writes “gold is money of course, but it’s too deflationary and clunky to be used as a medium of exchange. Hence, investors own it primarily as a store of value – and one of the many reasons Bitcoin is often compared to gold.”
Then Timmer explains in the past “during structural regimes in which inflation runs hot, real rates are negative, and/or money supply growth is excessive, gold tends to shine and gain market share relative to GDP. Notable examples: the 1970s and 2000s.”
Gold has done a fantastic job of preserving purchasing power over the years. I don’t know many young people who are interested in holding the precious metal though. They look at it as an asset with no upside return, regardless of whether that is right or wrong.
If bitcoin can leverage the sound money principles to benefit from these periods of high-inflation and/or undisciplined monetary policy, just as gold has done for decades, then it would make sense that young people will continue to allocate capital to the digital version.
As Balaji Srinivasan once said, by 2040 everyone under the age of 30 will have grown up in a world where bitcoin existed. They will see no difference in the “newness” of bitcoin vs gold. Both assets will have been around forever in their eyes.
So now that Fidelity is publicly calling bitcoin “exponential gold,” we have to assume that Wall Street is waking up to this same idea. If you wanted to design an asset from scratch to benefit in a long-term loose monetary policy regime, it would be the downside protection of gold and the upside opportunity of tech stocks.
More and more it appears this is a good description of bitcoin. Exponential gold.
Let’s see if this phrase catches on.
-Anthony Pompliano
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