Fidelity’s Director of Global Macro: ‘Reasonable To View Bitcoin As Cheap at These Levels’

On Wednesday (August 17), Jurrien Timmer, Director of Global Macro at Fidelity Investments, shared his thoughts on the Bitcoin ($BTC) price.

In March 2021, Timmer published a 12-page research paper on Bitcoin (title: “Understanding Bitcoin: Does bitcoin belong in asset allocation considerations?”).

Timmer started by saying that he intended his paper to serve as “a brief plain-English primer, but also to assess, in a meaningful way, the value proposition of bitcoin as it relates to asset allocation.”

After his study of Bitcoin, here were some of the conclusions he came to:

  • … bitcoin has gone mainstream, already considered a legitimate asset class by more and more investors.
  • … bitcoin has both a compelling supply dynamic (S2F) and demand dynamic (Metcalfe’s Law).
  • “… bitcoin is gaining credibility, and as a digital analog of gold but with greater convexity… bitcoin will, over time, take more market share from gold.

Timmer said that “if gold is now competitive with bonds, and bond yields are near zero (or negative), perhaps it makes sense to “to replace some of a portfolio’s nominal bond exposure with gold and assets that behave like gold.”

He finished by saying:

If bitcoin is a legitimate store of value, is scarcer than gold, and comes complete with a potentially exponential demand dynamic, then is it now worth considering for inclusion in a portfolio (at some prudent level and at least alongside other alternatives, such as real estate, commodities, and certain index-linked securities)?

Despite the many risks discussed—including such factors as volatility, competitors, and policy intervention for some the answer may well be ‘yes,’ at least insofar as that ‘yes’ applies only to components on the 40 side of 60/40. For those investors, the question of bitcoin may no longer be ‘whether’ but ‘how much?’.

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Well, yesterday, Timmer shared his thoughts on the price of Bitcoin with his over 137K Twitter followers:

He went on to say:

For me, the main nuance is the slope of the adoption curve. Whether we use the mobile-phone curve or internet curve as proxies, Bitcoin’s price is below its actual and projected network-growth curve. That curve provides a fundamental anchor for Bitcoin’s price… If Bitcoin is gold’s precocious younger sibling, it makes sense to look at Bitcoin priced in gold (i.e., Bitcoin’s beta to gold). Technically, the recent sell-off produced the biggest oversold condition in years (measured as the number of standard deviations from trend)…

Who is buying Bitcoin these days? Apparently not the tourists (i.e., short-term holders). The percentage of Bitcoins held less than three months has barely budged lately… But the number of HODLers keeps growing. The percentage of Bitcoin held for at least 10 years is now 13%.

On August 12, Timmer appeared as a guest — as part of a panel that also included Raoul Pal and Kevin O’Leary — on an episode of Ran Neuner’s “Crypto Banter” podcast that was streamed live on YouTube.

This is what Timmer had to say with regard to upcoming stablecoin regulation and how it could affect the crypto market:

Fidelity, which I probably represent, we’ve been in Bitcoin since 2014. Not a lot of people appreciate as a legacy financial services firm how how long we have been involved… I was part of a delegation in Austin, Texas, in June [2022] for the Consensus [event], and we had the regulators, we had the senators who are proponents of the space, and we had the chair of the CFTC there.

And there was a lot of consensus — for lack of a better word — that at least regulating the stables is kind of the ultimate no-brainer. You don’t even have to worry about whether it’s a security or commodity. So, that was pretty low-hanging fruit. And obviously, it’s good that it’s hopefully going to happen because it will legitimise that the space, and it will will help the institutional adoption. It will make institutions feel a little bit more comfortable that there are actually some guardrails involved, even though it’s only the stable side and not the actual space itself, but at least it’ll be a start.

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