Fidelity Macro Analyst Highlights Bitcoin’s Potential as Inflation Hedge Amid Money Supply Concerns

• Bitcoin and gold are increasingly discussed as stores of value and potential hedges against inflation.
• Fidelity’s macro analyst suggests the need for a persistent increase in money supply to support this argument.
• Recent comments from Jurrien Timmer highlight the current trends in monetary policies and their impact on these assets.

Discover why Bitcoin and gold are viewed as hedges against inflation, and what needs to change for this argument to be valid.

Sustained Money Supply Increase: A Prerequisite for Bitcoin and Gold as Stores of Value

Many financial analysts believe that for Bitcoin and gold to effectively serve as hedges against inflation, a prolonged increase in the money supply is essential. According to Jurrien Timmer, the director of global macro at Fidelity, periods of substantial inflation are generally preceded by consistent growth in the monetary aggregates.

Analyzing the Current Money Supply Trends

Timmer notes that during the recent pandemic, there was a notable spike in M2—a measure of the money supply that includes cash, checking deposits, and easily convertible near money. However, this increase has largely reversed due to the Federal Reserve’s tight monetary policies. Consequently, the hypothesis that Bitcoin and gold can act as hedges against a weakening currency remains untested under current conditions.

Bitcoin’s Current Market Performance

As of now, Bitcoin is trading at around $68,435. Despite its recent performance, where it has seen a near 4% decline over the past seven days, it remains the top-ranked cryptocurrency by market cap. This fluctuation underscores the volatility and the speculative nature of cryptocurrencies, particularly when used as a store of value.

Future Expectations and Investor Sentiment

The discussion around Bitcoin and gold as stores of value is contingent on future monetary policies and their impact on inflation. Investors need to stay informed about economic indicators and trends in money supply growth. While the store of value narrative is strong, its realization depends on changes in the broader economic environment.

Conclusion

In conclusion, Bitcoin and gold hold potential as stores of value, especially in an inflationary environment driven by increased money supply. However, current monetary trends indicate that this condition has not yet been met. Investors should watch for sustained monetary growth as an indicator for when these assets might truly function as hedges against inflation.