Bitcoin may be an inflation hedge like gold, but its risk-reward is in a “different universe,” says Fidelity.
Bitcoin is a store of value currency and inflation hedge likable to “exponential gold,” wrote Jurrien Timmer, Head of Global Macro at Fidelity, in a post to X on Wednesday.
The analyst argued that both Bitcoin and gold boast distinct but attractive risk/reward ratios right now and that both may be players on the “same team” regarding their investment theses.
Gold Versus Bitcoin: A Historic Look
As outlined by Timmer, Bitcoin began is rallying again this year in line with “the pattern of previous boom and bust cycles.”
The asset reclaimed $35,000 per BTC on Wednesday, with market participants excited over a potential spot Bitcoin ETF approval within the next two months. It’s also arguably rallied as a “flight to quality” for savers as the market loses faith in long-dated treasuries, pumping its price alongside that of gold.
“Historically, 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,” explained Timmer.
Investors have frequently compared Bitcoin to gold for its strong monetary properties, including its reliable scarcity compared to fiat currency. Some, like Michael Saylor, consider Bitcoin an even better alternative for its digital benefits and the early stage of its adoption cycle.
While Bitcoin remains far more volatile than gold today, Timmer noted on Thursday that this works to its advantage during a rally. When comparing the risk-reward of BTC versus other asset classes since 2020, he said that the digital currency “is in a different universe.”
“Yes, Bitcoin is down 54% from its two-year high, but it is also up 84% from its low,” he said. “Government bonds can’t hold a candle to that risk-reward math, and neither can many other asset classes, at least at this moment.”
Fidelity’s Bull Case For Bitcoin
Fidelity has for years run a digital asset unit championing crypto as an investable asset class, offering both custody and trading services for Bitcoin and Ethereum.
The asset manager is actively working with regulators on its application to launch a spot Bitcoin ETF – an investment product expected to invite billions of dollars of institutional capital into Bitcoin. BlackRock is now competing with Fidliety for the offering, which analysts believe may be simultaneously approved for all applicants by early January.