Why invest in Bitcoin instead of gold as a hedge against inflation? For Jurrien Timmer, director of Fidelity, BTC would have a serious advantage: “The supply of bitcoin, by design, is limited. “
Faced with inflation, large companies are choosing to invest their cash in Bitcoin. They could have opted for gold, however, in less volatility. But why then favor the crypto-asset?
Jurrien Timmer, Director of Global Macro for Fidelity Global Asset Allocation, provides several answers. The road will be long, however. For gold has a long, “almost unchallenged” history as a store of value and a source of inflation protection.
The advantage of Bitcoin’s scarcity
However, in this history gold has never had a serious rival. This is now the case with Bitcoin, also seen as a store of value. And BTC is so similar to gold that it is also referred to as digital gold.
It remains to be seen which would possibly be the better of the two. For the expert, however, Bitcoin has a possibly unique advantage. “Bitcoin’s supply, by design, is limited,” Timmer points out.
On the contrary, gold production has been stable for years now. Thus, “gold is scarce, but it is not scarce.” This parameter is of paramount importance in the value of the asset. Because scarcity promotes price appreciation and therefore financial returns.
However, the leader of Fidelity does not seek to hide certain realities. First, volatility. On the other hand, gold is a physical asset, unlike Bitcoin. This is a significant reassurance factor for investors.
Gold and BTC take on bonds
“In addition, bitcoin is a brand new asset that could be threatened by future regulation,” acknowledges Jurrien Timmer. Gold, by comparison, is immune to regulatory change.
However, gold and Bitcoin represent alternatives to stocks and bonds. Why ? The current low level of interest rates. But competition would threaten bonds first.
“In a world where stocks and bonds are 60/40, gold and bitcoin are, in my opinion, potential disruptors for the 40s, but not for the 60s,” comments the Fidelity executive.
However, with its $ 900 billion capitalization, Bitcoin is still far from rivaling gold (over 11 trillion). But the battle is over the long term. Timmer therefore believes “that bitcoin will, over time, gain more market share from gold. “
In addition, gold, or its digital equivalent, has development potential as a substitute for bonds. For the expert, Bitcoin clearly has its place in the equation thanks to its advantages over gold. The “bitcoin question may no longer be ‘if’ but ‘how much’,” he concludes.