Fidelity’s Director of Global Macro, Jurrien Timmer, recently discussed the ongoing debate over whether Bitcoin or gold provides a more dependable store of value, outlining scenarios in which each asset class may or may not effectively hedge against inflation based on economic conditions.

Timmer’s analysis revolves around the concept of "fiscal dominance," where governments expand the money supply, posing a threat to currency purchasing power. He references historical data on the relationship between M2 money supply and CPI inflation to support his views.

While both Bitcoin and gold are considered resilient to inflationary pressures in theory, Timmer suggests that the environment conducive to their full potential as hedges has yet to fully materialize, despite recent indications of a more hawkish stance from the Federal Reserve.

Bitcoin is often likened to "digital gold," characterized by its monetary attributes akin to traditional gold and its innovative qualities as a new internet technology, according to Timmer. However, for Bitcoin to cement its role alongside gold as a store of value, excessive growth in fiat monetary aggregates would need to persist well beyond normal trends.

Despite a surge in M2 money supply during the pandemic, Timmer notes that the Federal Reserve’s subsequent tightening of monetary policy curtailed this growth, indicating that Bitcoin and gold may still be premature in their roles as definitive stores of value.

Currently, Bitcoin’s price has risen to $69,523 following a recent CPI report suggesting a slowdown in inflation, potentially reinforcing its status as a store of value. Similarly, gold has experienced a 0.91% increase in price over the past 24 hours, trading at $2,336.

Meanwhile, recent data from Barchart indicates that Bitcoin's correlation with the 10-year U.S. Treasury bond yield has dropped significantly to its lowest level in 14 years, indicating a decoupling from traditional financial metrics. This divergence suggests that Bitcoin is increasingly independent of conventional market influences such as Treasury bond yields, which could bolster its case as a unique asset class and a non-traditional hedge against financial instability.

Timmer acknowledges, however, that both Bitcoin and gold face challenges as stores of value that hinge on future economic conditions, particularly concerning money supply dynamics and inflation trends.