In a recent series of posts on
Timmer’s analysis, which is deeply rooted in historical financial data dating back to the 1700s, juxtaposes the price changes and volatility of traditional stores of value like gold and silver with the nascent, but rapidly evolving, Bitcoin .
Bitcoin as Exponential Gold: In the past I have explored Bitcoin primarily from a demand perspective, studying S-curves to generate a demand-based valuation framework. Today I present my supply-based approach, which is a variation of the stock-to-flow (S2F) concept.🧵
— Jurrien Timmer (@TimmerFidelity) February 22, 2024
Exploring historical volatility
Timmer’s analysis paints a vivid picture of how the volatility patterns of gold and silver changed after 1970, marking the transition to a fiat currency system.
This era has seen these precious metals, and more recently Bitcoin, react dynamically to various monetary and inflationary regimes.
A key insight of Timmer’s work is the introduction of “excess money” as a variable defined as the growth rate of money supply minus GDP growth.
This concept helps explain the significant price movements observed in the chart.
It shows the increase in volatility and valuation during periods of greater growth in money supply relative to economic output.
Bitcoin’s Position as “Exponential Gold”
As reported by U.Today, Timmer had previously positioned the cryptocurrency as “exponential gold”, drawing parallels between its meteoric rise and traditional stores of value.
Examining the purchasing power of fiat currency over the past 150 years, Timmer illustrated the explosive growth of Bitcoin compared to the more gradual appreciation of gold and silver.
Timmer has repeatedly highlighted the importance of Bitcoin’s limited supply and its role in the asset’s valuation, but emphasizes that the real appeal lies in the growth of its network, following an S-curve of adoption similar to other disruptive technologies.
